Turning Point by John Francis Kinsella
After a frenzied Viking feast of spending money they did not own, Icelanders flooded now into supermarkets to stock-up on food as prices in local krona sky rocketed. The sudden collapse of the country’s banking system threatened to cut the island from its essential needs. Sales in supermarkets soared and warehouse stocks were depleted, disaster seemed imminent as shelves emptied and the island’s government appealed to Europe for help.
Until the economic boom the small island, which lay isolated in the middle of the North Atlantic Ocean, with its meagre population of three or so hundred thousand, had been nothing more than a wind blown, treeless land, a barren waste of volcanic rock, geysers, moss, and lichen, with cod fishing as its only industry. Then suddenly out of the blue every Icelander suddenly became an investor, a banker, or jet-setting wheeler dealer.
Following the collapse of its three largest banks the country’s foreign currency market had ground to a halt. The central bank ditched any attempt to peg the exchange rate of the krona as foreign suppliers demanded payment in euros and the government pleaded with banks to provide funds for the population’s vital needs; food, medicines and fuel.
After the banks’ wild spending spree gobbling up foreign businesses regardless of price, even British football clubs, the ordinary citizens of Iceland woke with a gigantic headache; a mountain of debt, billions of dollars, twelve times the size of their whole economy. It was as if a medium sized English town was stuck with a bill of one hundred billion.
It seemed inexplicable. Icelanders had proudly boasted, like their Irish neighbours, one of the highest per capita incomes in the world. Then as if to add insult to injury the British government imposed draconian sanctions on the tiny country, putting the democratic nation with the world’s oldest parliament, that went back to 930AD, on a par with al-Qaeda.
Iceland was not alone in dabbling with banana republic banking, the terrible reality was British banks had done exactly the same thing; borrowing overseas to lend to their UK customers, putting the British government in an embarrassing situation at a moment when faith in the pound sterling was at its lowest with the cost of insuring the government against default rising vertiginously.
Overnight the British pound as a major reserve currency was a thing of the past. Even the euro, much maligned by the British press, had raced ahead of sterling. The Bank of England was forced to reduce interest rates to their lowest level for three hundred years, and the country’s leading banks had effectively been nationalised.
The City of London had imploded in the wake of Wall Street after having created an incestuous relationship with its American cousin trading in a myriad of complex financial products, creating new hedge funds and inventing exotic derivatives, all to satisfy the voracious appetites of investors out for a quick profit.
London was licking its wounds, bedraggled and bewildered under the burden of staggering losses, struggling to find its way along what would without doubt be a long and uncertain road towards a more sober future. Those who imagined it could have cheerfully continued on its way by simply dusting itself off after the fall would have been mistaken. However, it was not the first crisis London had faced, and given time it would no doubt recover its confidence and hopefully develop a saner and healthier approach to banking and finance.
Iniquity
Until the economic boom the small island, which lay isolated in the middle of the North Atlantic Ocean, with its meagre population of three or so hundred thousand, had been nothing more than a wind blown, treeless land, a barren waste of volcanic rock, geysers, moss, and lichen, with cod fishing as its only industry. Then suddenly out of the blue every Icelander suddenly became an investor, a banker, or jet-setting wheeler dealer.
Following the collapse of its three largest banks the country’s foreign currency market had ground to a halt. The central bank ditched any attempt to peg the exchange rate of the krona as foreign suppliers demanded payment in euros and the government pleaded with banks to provide funds for the population’s vital needs; food, medicines and fuel.
After the banks’ wild spending spree gobbling up foreign businesses regardless of price, even British football clubs, the ordinary citizens of Iceland woke with a gigantic headache; a mountain of debt, billions of dollars, twelve times the size of their whole economy. It was as if a medium sized English town was stuck with a bill of one hundred billion.
It seemed inexplicable. Icelanders had proudly boasted, like their Irish neighbours, one of the highest per capita incomes in the world. Then as if to add insult to injury the British government imposed draconian sanctions on the tiny country, putting the democratic nation with the world’s oldest parliament, that went back to 930AD, on a par with al-Qaeda.
Iceland was not alone in dabbling with banana republic banking, the terrible reality was British banks had done exactly the same thing; borrowing overseas to lend to their UK customers, putting the British government in an embarrassing situation at a moment when faith in the pound sterling was at its lowest with the cost of insuring the government against default rising vertiginously.
Overnight the British pound as a major reserve currency was a thing of the past. Even the euro, much maligned by the British press, had raced ahead of sterling. The Bank of England was forced to reduce interest rates to their lowest level for three hundred years, and the country’s leading banks had effectively been nationalised.
The City of London had imploded in the wake of Wall Street after having created an incestuous relationship with its American cousin trading in a myriad of complex financial products, creating new hedge funds and inventing exotic derivatives, all to satisfy the voracious appetites of investors out for a quick profit.
London was licking its wounds, bedraggled and bewildered under the burden of staggering losses, struggling to find its way along what would without doubt be a long and uncertain road towards a more sober future. Those who imagined it could have cheerfully continued on its way by simply dusting itself off after the fall would have been mistaken. However, it was not the first crisis London had faced, and given time it would no doubt recover its confidence and hopefully develop a saner and healthier approach to banking and finance.
Iniquity