Talk:2008–2011 Icelandic financial crisis/Archive 3

Archive 1

Archive 2

Archive 3

Out of date

Many sections of this article are out of date; they only offer the viewpoint at around December 2008 at the latest. See e.g. the Development section. It ends by saying that IMF approved a loan to Iceland in November, but the crisis has evolved greatly since then. The Bank restructuring section has similar issues. The article barely mentions the socioeconomic effects of the financial crisis upon the Icelandic people, although these are among the most direct consequences of the crisis. Or should there be a separate article on the consequent 2008-2009 Icelandic economic crisis? 85.220.55.19 (talk) 10:26, 5 September 2009 (UTC)

I agree with this entirely. Part of it is talking about the situation in 2008 and says 'still unclear', surely this has been cleared up now? — Preceding unsigned comment added by 130.235.47.140 (talk) 09:34, 30 November 2012 (UTC)

Seven years since the end of the 2008–2011 period, many sentences are still in the present tense. Surely they should be rewritten in the past tense? Hedley

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Ongoing?

It is being discussed to rename the page (along with many others) to Icelandic financial crisis (2008-present) which got me thinking: by what metric can it be said that the Icelandic financial crisis is ongoing? Probably not by any economic indicators like GDP, unemployment, public debt since these have been in recovery since 2010 or even late 2009. Is it about the unresolved fallout from the crash? Criminal prosecution and such? If so, then there are probably like 2-3 more years left. In any case, the article as it stands doesn't really support that the financial crisis is ongoing. --Bjarki (talk) 10:41, 17 January 2013 (UTC)

Well everything from politicians to IMF cronies have declared the crisis over in Iceland, right? I think it's mostly about what the general discussion is like, whether it's ongoing or over, considering that GDP fell to negative numbers in 2009 and 2010 but has been positive since 2011. I don't think that unresolved issues or criminal prosecutions have much to do with it (in most countries there's no accountability so technically the crisis would never end in those countries). As far as I can tell people have stopped talking about the crisis like before when it was a daily news story and people are regaining their optimism. Stefán Örvarr Sigmundsson (talk) 14:42, 17 January 2013 (UTC)

I have been active editing the European sovereign debt crisis and Greek government debt crisis articles. The only logical criteria, which as far as I know also currently is applied, is that the end year for any "Sovereign Financial crisis" article (as per the title name) will be equal to the last year where the state receives bailout support. Unfortunately I have not followed the Icelandic Financial crisis on a detailed level. Only started to look into it this week. So I am not aware when the Icelandic IMF bailout support will be completed. I know however for sure, that the standard IMF rules always impose surveilance and financial restrictions upon those states receiving support - for as long as they receive support - and hence this is also why this alone justifies we can claim the "financial crisis" is still ongoing until the "bailout program" has efectively ended. Danish Expert (talk) 00:45, 3 February 2013 (UTC)

The IMF-supported program with Iceland ended mid-2011 (IMF article). Because of a speedy recovery, Iceland began repaying its debt to the IMF ahead of time mid-2012 (IMF article). Stefán Örvarr Sigmundsson (talk) 03:07, 3 February 2013 (UTC)

Thanks for your update and links. Based on that, I will support the view that we declare the Icelandic Financial Crisis officially ended on 31 August 2011, at the time where IMF's bailout window ended with 1120 out of 1400 million SDR transferred. If Iceland (or any other nation) opts to extend the IMF relations with a Precautionary Conditioned Credit Line (PCCL), where no money is necesarrily drawn but with the credit line being granted as a "backup guarantee" for the sovereign nation to possibly drawn on if needed during a new subsequent time window, then we however have a special borderline situation, where you could also argue perhaps to extended the official year interval in the title for the Financial Crisis. In any case, it is of course okay to have a chapter in the article entitled "Aftermath", to deal with the events happening after the crisis has ended. At least this is my own personal opinion about it. My only remaining question is: Did Iceland after 31 Aug 2011 opt to sign an additional PCCL with IMF or one of its other bilateral supporters? If no, then I support we declare and reflect the crisis officially ended 31 Aug 2011. Danish Expert (talk) 10:51, 3 February 2013 (UTC)

Due to my great curiousity, I just did the additional search to answer my question above. The answer is NO. However, it is important to note Iceland since October 2008 and until today has been fiercely tied to what is referred to as "Capital Control". To say it short, it is all about protecting the ISK, to ensure the continuation of having a relatively stable exchange rate towards the foreign currencies. When the crisis started the Icelandic parliament had to pass a "Capital Control" law that have prohibited Icelandic people with foreign currency deposits to exchange them to the ISK. As of January 2013 this mean that foreign currency to the sum of 23% of the Icelandic GDP has been frozen (most of it figure as creditor claims in the old bankrupt banks - which will be partly repaid once the receiverships complete liquidation of the remaining assets - but still with such a significant amount that it on that point of time will cause an increased upward pressure on the ISK currency exchange rate and the related Icelandic inflation figures).

Iceland has been adviced by IMF to partly lift the "Capital Control", but only when their "Balance of Payments" and "Tightening of monetary policy (through sterilisation of the unnecessary ISKs in circulation)" are strong enough to allow it. If it is done too early, there is a great risk the ISK will collapse when facing the free liberalized market forces -which again will create huge inflation in Iceland- and basically reignite the financial crisis (perhaps even at a similar strength as experienced in Oct 2008). So the lifting of the existing "Capital Control" is still a very sensitive issue. If this measure had not been enforced, then Iceland would as a minimum now have needed a Precautionary Conditioned Credit Line from IMF as a guarantee towards the logic market pressures against the ISK. In other words, as long as the special "Capital Controls" are still enforced on Iceland, this is a clear sign the Icelandic Financial Crisis is still ongoing. It only ends, once the "Capital Controls" has been lifted through liberalization of the capital markets. What we have today is an artificially constructed situation, where all the economic parameters looks stable and good; but this is only because of the temporary enforced "Capital Controls" (which are still needed). Bottom line is, that I now think the Iceland Financial Crisis is still ongoing, and should be renamed to 2008–2013 Icelandic financial crisis. The following sources below, provide additional background info for all my main points presented above (as part of my reply):

• IMF Survey on Iceland's Recovery: Can the Lessons Be Applied Elsewhere?
• IMF Survey: Iceland's Unorthodox Policies Suggest Alternative Way Out of Crisis
• Economic stats for Iceland (all the most important paramters as of November 2012)

Please let me know if you agree/disagree with my reasoning above. Danish Expert (talk) 17:11, 3 February 2013 (UTC)

The capital controls may be here to stay. I don't think they alone constitute a crisis. The economy is growing again after losing a few percentage points, stock trading has resumed after having been suspended entirely, unemployment is down and again below the EU average. I feel like "crisis" is too strong for the situation. Stefán Örvarr Sigmundsson (talk) 18:01, 3 February 2013 (UTC)

I understand your argument, and also admit Iceland currently is positioned on the borderline. At one hand Iceland recovered, but on the other hand the financial crisis can not be claimed to be entirely overcome. Like if you get the flue and then recover to become feber free, but you still suffer from a related cold in three days afterwords. So where should we place the ending borderline for the disease/crisis? Giving it a second thought I will now change my position again, and buy your argument that we should differentiate between "Financial crisis" and "Financial troubles". Crisis is indeed more serious, and hence should also the criteria be for how we define its time borders. For sovereign states in financial crisis, I thus now think it makes sence we choose the borderlies related to the time window where a sovereign state is without complete access to the financial markets for covering its funding needs (and instead is receiving or a subject to receive bailout funds from other states/organisations). This mean for Iceland that the crisis officially ended 31 August 2011, and we have to change the name of the article to 2008–2011 Icelandic financial crisis. Do you agree? Danish Expert (talk) 21:18, 3 February 2013 (UTC)

I do agree but I just hoped more people would join this discussion to get more opinions. Another interesting thing is that the Icelandic government never spent any of the money lent to it by the IMF. The money was kept in a bank in the U.S. and was simply thought of as "foreign reserves" in order to boost the confidence in Iceland internationally since foreign markets were quite panicky at the time. Stefán Örvarr Sigmundsson (talk) 18:05, 4 February 2013 (UTC)

A state's fiscal situation is always the result of many underlying components and accounts. This is also the reason, why it is so darn difficult to put an exact date on the moment it will run out of money (in a situation where it lost its access to financial markets). The lending windows for sovereign bailout support, are always being designed by IMF after a narrow analysis of all the accounts and parameters, and will last for as long as it takes to recover all the imbalances in the economy, with the end purpose (a couple of years ahead) for the sovereign state to regain complete access to normal financial markets for all future funding needs (incl. the ongoing task to refinance maturing debt). Ahead of the Financial Crisis, Iceland had a sound amount of governmental debt equal to around 30% of GDP, and this subsequently grew to an unhealthy level at 130% of GDP when the Crisis ended 31 August 2011. Basically we have to view all IMF loans + bilateral loans granted or arranged for to Iceland in Q4-2008, as part of the same bailout package (and they as a matter of fact also were designed with transfers taking place within the same "support window" as outlined by IMF, and AFAIK also with the same starting date for when the loan repayments should start). All the money where needed. Some of it were spend to recapitalize the newly secreted Icelandic banks, some of it were spend to cover the huge government budget deficits in 2009+2010+2011, and some of it was "used" (as you wrote) to rebuild the needed capital reserve (i.e. for the money drained Icelandic Central Bank) or for temporarily covering governmental securities and working as guarantees for other governmental loans/liabilities. It does not really matter how the money were used, as we can say for sure that all the transferred money were highly needed. This is why it makes so much sence to me, that we should pick the official end-date of the IMF bailout program also as the official end date of the financial crisis: 31 Aug 2011.

In regards of the starting date, I however think its reasonable to say it did not start with the activation day for the IMF bailout loan (17 Nov 2008), but instead actually started one month earlier when the Icelandic banks lost their access to interbank markets for traditional financial lending on 6 Oct 2008, due to the arrival of the Global Financial Crisis (which brought back risk awareness and demands for securities and credibility of financial assets to the previous level which generally had prevailed for America+Europe in the 90s) in combination with the fact that your 3 Icelandic banks had build up a way to high financial balance (10 times higher than the Icelandic GDP) -and when the markets could see their assets started to loose value due to the global recession, while at the same time the Icelandic Central Bank (or state) could not help them with their refinancing needs as a last lending resort, the situation was really doomed to collapse both for the banks and for Iceland. I am happy to see you succeeded to recover so fast, as you did. If nobody objects, I will soon add to the article that the Icelandic financial crisis took place from 6 Oct 2008 - 31 Aug 2011. Danish Expert (talk) 11:06, 6 February 2013 (UTC)

Those dates are fine for now. As far as I've been able to deduce the money lent to Iceland by the IMF, Nordic countries and Poland has still not been used (spent) by Icelandic authorities and is located in a U.S. bank. Politicians have appeared in the media and published press releases, since the loans were granted, promising that they money would not be used but instead only thought of as emergency foreign reserves. That is in line with what I’ve been able to find on the website of the Ministry of Finance and Economic Affairs, online news articles and essays. Stefán Örvarr Sigmundsson (talk) 18:19, 6 February 2013 (UTC)

This is interesting info indeed. It would be great if you have time also to upload this extra info to the Sovereign debt chapter. I know the Icelandic Central Bank more or less lost its entire foreign currency reserve in October 2008, and it sounds like the money have been dedicated to function as foreign currency reserve for your central bank. It is a common thing that such a reserves are not used, but they still have huge effect towards the financial markets, as it function as a backstop towards currency speculation when they know that the central bank at anytime (if needed) can intervene and support the ISK. So despite not being used, it is still indirectly used. My own guess is, that the money in the future still will function as foreign currency reserve, meaning that I expect the Icelandic government to repay IMF and nordic countries not with the same unused money, but actually doing the repayment by issuing new government bonds. I don't know for sure, but this would be my guess, in particular because the recent IMF article claimed the Icelandic government had issued new bonds in order to repay the first portion of the debts. So I assume it will work like that. If you can find more details about it, this would of course also be appreciated. :-) Danish Expert (talk) 22:16, 6 February 2013 (UTC)

You‘re right, it‘s common not to use the loans received from the IMF directly – for those countries that are able to do so. The central bank did blow its entire foreign reserves in one day in October in an act of epic failure. The government has re-entered the international bond market but as far as I’ve been able to tell the buyers have been mostly private sector entities. The first loan received by the government came from the Faroe Islands – of all places – and it has been repaid in cash I believe. Early 2012 the government repaid 20% of its IMF and Nordic loans ahead of time. I believe the loans were due in 12 years from the moment they were received. Stefán Örvarr Sigmundsson (talk) 02:36, 7 February 2013 (UTC)

After changing the title to "2008-2011", I have now also updated the lead so that it reflects our main findings posted in this debate. My thought is, that the last subchapter in the article named Aftermath (2012–2013) can deal with all relevant post crisis economic observations related to the aftermath of the Icelandic Financial Crisis. BTW, the article could also benefit from a wikitable with the main economic stats for the years 2007-2013, to have an overall comparision table with "pre crisis figures", "crisis figures" and "post crisis figures". I do not have time to do it right now, but just wanted to plant the idea here at the talkpage, if you (or other editors) have the passion or time to help create it. :-) Danish Expert (talk) 12:38, 8 February 2013 (UTC)

Debt to GDP ratio

I noticed that http://www.dailykos.com/story/2011/08/01/1001662/-Iceland-s-On-going-Revolution has a confusing debt to GDP ratio, and we dont yet have a good chart of that ratio. http://www.tradingeconomics.com/iceland/government-debt-to-gdp and http://www.tradingeconomics.com/iceland/central-government-debt-total-percent-of-gdp-wb-data.html look like good data. Any thoughts about creating and adding such a chart? Will need to find the original source link because of [1] and MediaWiki_talk:Spam-blacklist/archives/January_2008#tradingeconomics.com. John Vandenberg ^(chat) 07:12, 6 March 2013 (UTC)

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End?

What was in end?--Kaiyr (talk) 14:46, 1 July 2014 (UTC)

What are you asking? Stefán Örvar Sigmundsson (talk) 19:12, 1 July 2014 (UTC)

Did iceland return finance to unternational banks?--Kaiyr (talk) 14:59, 2 July 2014 (UTC)

Assuming that I understand your question, the answer is no. Stefán Örvar Sigmundsson (talk) 19:21, 2 July 2014 (UTC)

Peer review

Should we subject this article to peer review?Lbertolotti (talk) 15:07, 12 August 2015 (UTC)

Judgments Section, Imon, Al-Thani, and Exeter Cases

In the 'Judgments' section, several of the judgments are said to be due to the defendant's involvement in the "Imon case," "Al-Thani case," or "Exeter case," yet, what these cases were or what the defendant's alleged or ruled involvement in the case was is not mentioned. Furthermore, the names "Imon," "Al-Thani," and "Exeter" appear nowhere else in the article and the cited sources are all in Icelandic. It would be useful if a section or perhaps a new, linked article (ideally with English sources, if possible) were added to explain what these cases were and, if possible, what the defendants' involvement in them was alleged or ruled to be. Vbscript2 (talk) 16:34, 22 October 2015 (UTC)

I'm not sure you'll find many source in English.. (I think they are all only domestic related except for the Al-Thani case). Still I googled and found: "In September 2008 Kaupthing made much fanfare of the fact that Sheikh Mohammed bin Khalifa al Thani, a Qatari investor related to the Qatar ruler al Thani, bought 5.1% of Kaupthing’s shares."[2] In essence, the case was about that, making it look like there was some interest when, Al Thani didn't really take any financial risk ("markaðsmisnotkun", e. market manipulation). I believe all the cases may involve market manipulation, and the heads of the banks responsible by law, while Al-Thani was not charged (may even have been fooled). See also: House of Thani

She also writes for the only English language newspaper in Iceland (there are some other magazines/web based) in addition to working at RÚV (government controlled): http://grapevine.is/author/sigrun-davidsdottir/

I just scanned her articles, may or may not be helpful: http://uti.is/2015/11/plan-to-lift-capital-controls-crunching-the-numbers-again/ http://uti.is/2015/11/what-money-cant-buy-extra-services-in-an-icelandic-prison/

IMF loan almost paid up

In this edit the info on the IMF loan almost being paid up was lost.

From memory it was paid up, but I checked and it wasn't (possibly by now?), I put that info from the IMF in. And: Only the Nordic loan was paid up.

From memory, Icesave was also paid up (or at least no longer any claims against the government), while the government didn't (or have to, there was also an EFTA court ruling). comp.arch (talk) 10:20, 8 December 2015 (UTC)

Capital Controls - Do we still have an Icelandic financial crisis ?

This is a revived continuation of the above Ongoing ? discussion. To say it short the current Icelandic capital controls in force, have helped to stabilize the Icelandic economy. If you remove them completely day-by-day tomorrow, the ISK exchange rate would loose half of its value, the inflation figures would return to double digits, interest rates would need to be doubled, and economic activity would sharply decline leading to a new recession with increasing unemployment. This mean, that despite we all agree Iceland on paper has experienced an economic recovery from the "Icelandic financial crisis 2008-11", this can not be claimed to be a full recovery. To qualify as a full recovery, we also need to have the currency controls lifted. On the long term the currency controls hamper Icelandic economic growth, as they block any renewed foreign investment capital to enter Iceland. On the short term the capital controls are however needed to avoid introducing an economic shock for the Icelandic economy. The best way to describe it, is that the Icelandic economy currently live in a protected bubble created by the capital controls, which mean the recovery on paper to some degree is artificial - or at least incomplete.

In the Aftermath section, I have shortly mentioned the current Icelandic plans to abolish the capital controls. On 20 September, the Icelandic PM confirmed a concrete proposal will be launched in November 2013.

The question however is if we shall continue to treat it as a "crisis aftermath", or define it as part of the Icelandic financial crisis?

My mind is still split on this question. On one hand it is a direct central part of the crisis, but on the other hand, Iceland could also without any pain get rid of the problem from day to day, if they just chose to quit the weak Icelandic Kronur and replace it with adoption of the strong euro. So to some degree it also depends on what Iceland chooses to do. The current government clearly aims at no euro adoption, but instead a gradual currency control abolition - along with launching substantial debt reliefs to Icelandic households. Choosing this road, in my point of view support the argument that the Icelandic Financial Crisis is still ongoing - until this capital control issue has been fully solved. The economy will continue to be "hospitalized" by currency controls (it is stable but still in respirator) - until the ISK is strong enough for a complete abolition, and until that point I think its fair to say the Icelandic Financial Crisis is still ongoing. I also think the most likely scenario is, that the capital controls can only be lifted gradually throughout a period of 10-30 years.

Yet, I also recognize Wikipedia should reflect how the majority of ordinary people experience and refer to the so-called "Icelandic financial crisis", and if the majority say it has ended, this also put pressure on Wikipedia to report the same.

I guess my compromise proposal could be, that we continue to treat "abolition of capital controls" as aftermath to the Icelandic Financial Crisis 2008-11, for as long as the abolition do not cause renewed short term financial troubles for the Icelandic state. If such troubles arise (which they might do if capital controls are abolished to fast), I will however heavily argue the Icelandic financial crisis was still ongoing until these additional problems got solved. Please let me know if you agree/disagree on this compromise proposal. Danish Expert (talk) 12:47, 20 September 2013 (UTC)

Danish Expert, "The Impossible trinity (also known as the Trilemma) is a trilemma in international economics which states that it is impossible to have all three of the following at the same time:

A stable foreign exchange rate

Free capital movement (absence of capital controls)

An independent monetary policy"

I may misunderstand, Icelanders do not have "Free capital movement" (of course some movement, some is necessary, I'm not sure how much, is more really needed, for Icelanders mostly or do (only?) foreigners loose?). It seems that it may be ok.., one of the options..

You are saying Icelanders should "use" the Euro (drop "An independent monetary policy"?) and have "stable foreign exchange rate" (meaning the Krona linked to the Euro, as with the Danish Krona, or just adopt the Euro)?

"On the long term the currency controls hamper Icelandic economic growth, as they block any renewed foreign investment capital to enter Iceland." – Still, an ongoing Chinese [smaller scale] aluminium plant is going to be built in Iceland[3]!?

Are we immune to a Black Wednesday? I.e. is that what happened in the UK, they tried to have all three? Could someone like Soros come and do that to Iceland, with capital controls? If those stop that, is it worth it loosing the controls, and could they be kept for all eternity?

Didn't/doesn't China have capital controls? And fix to the US dollar, while not any more. comp.arch (talk) 11:26, 8 December 2015 (UTC)

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Please incorporate points from this Bloomberg article in the article

[4] The Wiki article is woeful in its current state. It ignores the personal household debt forgiveness which has helped the Icelandic economy recover. As stated by Fitch! Boscaswell talk 06:22, 3 February 2016 (UTC)