Independent Financial Advisor Kent
Iceland: A metaphor for the crisis
Appears like the catastrophe of all financial disasters we have seen so far. Iceland, a country some 320,000 people trapped in the roof of the world, has become a sort of single point of reference for the credit binge and freeze.
It could very well be the first company to go bankrupt because of the frenzy of killing by the credit crisis, now frozen.
Just a little help from neighbors willing to risk billions and perhaps never see the money to go see the country avoid bankruptcy. To begin negotiations with Russia on a loan of EUR 3 billion on Tuesday.
No repeat of Argentina or Russia defaulting on debts: in these cases was a failure last time for politicians and venal of despair and entrepreneurs.
Iceland did not choice: the failure of the entire country is the only option: the government has had sporadic discussions with the International Monetary Fund could help, but apparently resists the obvious costs.
But the whole financial system is rotten too much debt, too little capital and not only the prospects recovery in Iceland and Europe, especially Great Britain.
Three major banks all prisoners held by the government: Number 3 Glitnir was placed into administration yesterday after the government abandoned attempts to keep him alive, Landsbanki seized earlier this week, triggering a major online with Great Britain over billions of pounds of savers' money in the United Kingdom and the largest bank yesterday, was seized Kaupthing the government ended an attempt to keep him as a "national champion".
The trio of banks had debts of US61 million dollars, 12 times Icelandic economy: a total of 11 million dollars of debt (about $ US15 billion) because of this year and into 2009.
The banking system has all but collapsed and the government are trying to build a new bank to the ruin of the trio.
The government has pushed interest rates to try to stabilize the situation and the crown, but in vain. Trading in the stock markets of the country was closed until Monday.
In its place arose a sharp slowdown in outsourcing of gross domestic product of nearly 4% in March quarter of this year compared to December quarter 2007.
The magnitude of the imbalances built is amazing: the external deficit was 25% of GDP in 2006 and 17% 2007. Short-term external debt amounted to 15 times value of central bank reserves of foreign exchange at the end of 2007, approximately 200% of GDP. Debt Long-term foreign currency amounted to another 350% of GDP.
Bank's assets have been running 10 times the GDP at the end of last year. All this to buy stakes in football clubs, societies, and other assets in Britain, Denmark, the United States and elsewhere.
And even now, some commentators hope for him. If you were a creditor, what would you invest more in U.S. or throw money away in Iceland. Some of their investments abroad (for example, the retailer the United Kingdom, House of Fraser) purchase juicy and negotiations for people with money.
But there can be no favors and the price moderate and high losses of Icelandic banks, employers and the country as a whole. It is not possible that the country can reach the private debts of banks.
Iceland is nothing more that the imminent collapse of the country most focused on in the world. It is a combination of Lehman Brothers Bear Stearns, AIG and other Basket Case we have seen, rolled into a ball of snow disasters. A financial black hole production.
Banks full, the investment companies in plush, the central bank can do nothing, the transitional government competition: if no reserves or money, can not do anything.
Pension funds have billions of dollars invested in foreign accounts, but have been severely damaged the fall (US11.8 billion dollars earlier this year, according to reports this week).
The Government is seeking a loan of about $ US5 million Russian perhaps, the Central Bank of Sweden has granted a US700 million loan to the Swedish subsidiary of a bank to protect the fragile Swedish depositors. The bank collapsed.
This left the affairs of Glitnir, the third largest, that the government washed hands of it, 10 days after saving an agreement US1 billion, the financial regulator gave the country and sacked the board and senior management.
But now there is a row against nature with Great Britain today as it was the country of choice for banks to finance companies to invest in Iceland, many of them had the participation of pension or partnerships with banks themselves now.
The figure will be large and the United Kingdom, and will probably find more than $ US7 billion to save individuals, companies, charities, local and Regional billion dollars were invested in the two main branches of Icelandic banks two largest banks, Icesave (part of the difficulty Landsbanki) and Kaupthing Edge. These operations are mainly bank runs online from Iceland, who collect deposits in the United Kingdom.
UK As indicated, the government expects the scheme Iceland compensation for depositors to cover approximately £ 2.2 billion pounds 4600000000 Landsbanki 300,000 due to depositors, with 1.4 billion pounds industry compensation scheme for British financial services and the rest of government. The course assumes that Iceland has money to cover the cost of guarantees.
The Treasury said the government would have to cover a large part of the contribution of the compensation system is that money is not enough. The government would cover the contribution of taxpayers with income from the sale of Landsbanki assets estimated £ 7,000,000,000 in the United Kingdom. But even small losses being taken to the asset values are falling for many investments in the United Kingdom.
Kaupthing Singer Friedlander, the UK arm of Kaupthing Bank Iceland weakened, was placed into administration on Wednesday night by the British government to protect investors.
Was after Cantor had inflicted heavy losses estimated at U.S. $ 2 billion in London, Robert Tchenguiz (His brother Vicente tried earlier this year acquired a fund managed by Challenger and built a set of 320 million U.S. dollars through a company called Arkmile. The assault was suspended in August, when Challenger Arkmile and any agreement reached.)
London media reports said Mr Tchenguiz property entrepreneur, lost £ 1,000,000,000 in 24 hours when the singer Friedlander forced to sell their shares in the company, J Sainsbury and pub group, Mitchells & Butlers.
The Financial Times said Mr Tchenguiz lost up to £ 600 million by selling a 10% stake in Sainsbury's (the third largest chain supermarkets in Great Britain) and another 400 million pounds on the sale of its 25% of the F & B (as he is known in London).
Kaupthing Singer Friedlander and would have forced the sale, while trying to generate cash by selling assets and reducing their loans and other exhibits, collection money and reduce your risks of loans. He joined the administration after-sales events.
The Times of London reports that dozens of local councils risk losing hundreds of millions of pounds of taxpayers' money in Iceland banks affected.
Municipalities across the country may have to raise taxes municipal services such as cutting the impact of the collapse of the Icelandic economy broadened in a diplomatic row with Britain.
"Alistair Darling, the Chancellor, pledged yesterday to make good all losses suffered by the 300,000 British savers caught by the collapse of Icesave, the online bank that went into receivership on Tuesday, "reported the newspaper yesterday.
"The move will cost the Treasury around £ 4500000000 – and led to an implicit promise that Mr Darling could do the same thing if other banks collapsed. The government also took control of the British part of the Icelandic bank Kaupthing, as it could not fulfill its obligations to customers.
The Times and other newspapers said the British government uses the fight against terrorism powers to freeze about £ 4,000,000,000 financial assets in Landsbanki UK bank Icesave mother.
"The authorities in London is about 200 million pounds in Icelandic banks. They include Westminster, who said he had £ 17 million split between Landsbanki and hereditary Sutton – £ 5.5 million – And Havering, which has invested in a total of £ 12.5 million. Outside the capital, Kent County Council said it had deposited £ 50 million in Icelandic banks – £ 15 million with Glitnir Bank, £ 17 million with Landsbanki and just over £ 18 million in its UK subsidiary, hereditary. "
The government throws Glitnir, the third largest bank, the financial regulator, using emergency powers were used nationalization on Tuesday to promote the nationalization of Landsbanki. Of the three big banks that fuel the boom in financial services in Iceland, Kaupthing remains independent.
An Icelandic businessman Jon Asgeir Johannesson, controlled the largest stake in Glitnir and has also chaired Baugur, the retail business which has several retail chains in the United Kingdom (House of Fraser)
It has now been withdrawn, leaving the fate of UK retailers in the air at a time when the sector is slowly receding as the recession rolls in the country. Begur has a number shares of retailers and groups listed here unquoted UK, USA and Europe.
Kaupthing Bank has received only $ US1 billion Central Bank of Iceland and said he was "helping" the government of the restructuring of Glitnir. Leading to seizure yesterday.
Dutch banking group ING and the online insurance said its UK subsidiary and telephone banking has agreed to buy £ 3,000,000,000 in deposits of the United Kingdom, two Icelandic banks for an undisclosed amount.
The Dutch said that his unit ING Direct (which operates in Australia) has been the acquisition of £ 2,500,000,000 in deposits from customers Kaupthing Edge in the online arm of UK Kaupthing, the Icelandic lender, and £ 538million in savings deposits at the Bank hereditary which is owned by Landsbanki, the Icelandic bank and not entered in the administration on Tuesday.
And Iceland has been more effort to strengthen ties with the crown at a rate of 131 per euro.
The answer is simple: the market does not believe that the type, or otherwise. Investors are looking at a very important relationship:
Iceland's banking system collapsed under the weight of debts equal to 12 times the size of the economy.
The market was looking for a value of more than 200 crowns to the euro and more. In fact, last price was 340 euro. He was traded Thursday on the spot market.
If nothing is done quickly to stabilize the situation in the country is facing the prospect of inflation post-war economic collapse and hyper.
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