When Will The Recession End In Iceland?
The United States economy has hit a rough patch to be sure. With the economy in turmoil, Americans losing jobs, homes and taking advantage of credit counseling, there’s no dispute that times are tough. A comparably unthinkable economic disaster has similarly devastated Iceland, even more so than America.
One Icelandic blogger, Hjorter Smarason, describes how the nation felt when it from “the richest in the world to economic ruins overnight.”
“At first we were in disbelief,” he said. “Could this be real? Were the banks, our pride and ‘idols’ really turned into dust overnight? Were our prodigies just fake from the beginning?”
An extensive piece in Vanity Fair details the meteoric rise and fall of Iceland’s economy. Inspired by Wall Street, the Icelandic stock market increased by nine times from 2003-2007. In 2006, the average Icelandic family was three times as wealthy as they had been three years prior. But in October of 2008, Iceland’s three biggest, brand new banks collapsed in the same week, plunging citizens into an unexpected depression. Debt skyrocketed to 850% of the nation’s GDP.
Smarason describes a nation-wide rush to buy stock in their rising banks, which at one point purported to be worth ten times the nation’s GDP.
“I bought it all, I participated in the craze, buying stocks in the banks and making good money from it,” he said. “Luckily, I did not borrow money to buy stocks, like many others did.”
Like the United States, the Iceland financial disaster has also had an unfortunate affect on the housing market. Smarason estimates that the house he bought in 2005 for $1 million couple possibly fetch $400 in the current feeble market.
The best way to survive the economic crisis is to make something that the rest of the world wants, Smarason says, including intercontinental musical hits like Bjork and Sigur Ros.
“Creating a new company gives hope of something new that can be built up. And hope is something people really need to get through this.”
When the USA stabilizes fully, all other countries will do the same. So Icelanders should be a little patient