This Is Getting Real Bad

[lame54]

http://www.crooksandliars.com/cernig/iceland-teetering-too

From C&L:

I posted yesterday that nuke-armed Pakistan is only a month away from bankruptcy. Now tiny Iceland looks like it might get there first.

Iceland has formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy — from fashion retailers to top soccer teams.

The strategy gave Icelanders one of the world's highest per capita incomes. But now they are watching helplessly as their economy implodes — their currency losing almost half its value, and their heavily exposed banks collapsing under the weight of debts incurred by lending in the boom times.

... A full-blown collapse of Iceland's financial system would send shock waves across Europe, given the heavy investment by Icelandic banks and companies across the continent.

Iceland right now is apparently in a state of shock and gives a snapshot of what a depression with the Great in it will look like everywhere - "cafes were half-empty, real estate agents sat idle, and retailers reported few sales" says the AP.

And, just as Pakistan has begged the West for $100 billion to stave off economic collapse, Iceland has had to go cap-in-hand to a bigger power too. Only they've chosen the Russians - asking for a 5.4 billion loan to shore up the nation's finances.

That must be giving NATO planners conniptions. Loans like that, in the present climate, aren't going to come without strings and Iceland is the keystone in NATO's maritime defenses in the North West Atlantic, designed to keep Russian warships and subs containable in their home waters should the need arise.

The Icelanders say there were no military strings attached to the deal but they're also making it clear they've found a new friend when their friends in the West refused to help. And where financial friendships form other ties usually follow.

"We have not received the kind of support that we were requesting from our friends," said Geir Haarde, prime minister. "So in a situation like that one has to look for new friends."

In spite of the new friendship, Mr Haarde said it did not extend to military cooperation, refuting the suggestion that Russia might be given access to an airbase vacated by the US air force in 2006. "We are a founder member of Nato," noted an official, "categorically denying" any such deal.

...Chris Weafer, chief strategist at Uralsib investment bank, said, "Lending money to Iceland is a very strong and clear statement from Russia that it is solvent and it has spare cash."

"This is going to make a big difference to the Icelandic economy and it's a very clear statement. It builds up political goodwill which could be helpful when it gets into difficult negotiations over territorial rights in the Arctic," said Mr Weafer.

[MissMarple]

1. Oh dear God, please release us from this reign of demons.

Please.

[sam sarrha]

2. i really think W coulda pissed off the wrong people with this catastrophic Ponzi scam

and they might just get even...

[bbgrunt]

3. all the good will we are hoping for from an Obama

presidency may well be obliterated by rage at us for precipitating a world depression.

[bhikkhu]

4. That was a very interesting development

That Iceland was bailed out (somewhat) by Russian finance. Hard to say whether there is any long-term there other than bills to pay, but it is worth noting that Russia can do that because they are now very much a "creditor nation". That is, they have cash in the bank and cash in reserves and their government each year receives more money than it spends. Sometimes in the US it is hard to imagine, or easy to forget, that such a country is even possible.

[GreenTea]

5. Sadly, you're correct, its truly is going to get much worse.....

Hope you own some gold.

[TexasObserver]

6. Jesus, letting the Russians get Iceland for $5 billion is nuts.

Ain't nuttin' between the Northern Europe and North America except Iceland. It's an important way station.