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Jealous of Iceland

Monday, September 27, 2010, 10:16 AM

Yes, I am jealous of Iceland.  You see, they are facing their reality, and, while unpleasant, at least they are getting on with the necessary adjustments.  

Iceland, a tiny island nation with 315k souls, managed to rack up a stunning $100 billion in banking liabilities (half of which was external) that dwarfed its gross domestic product of approximately $14 billion. Well, not everyone in the country caused it; it turns out that about 50 people were involved in racking up those debts while everybody else was looking the other way.

The defining characteristic of something that is unsustainable is that it will someday stop.  Without being an economic genius or delving too deeply into brain-splitting economic minutiae, we can readily appreciate how such a debt load proved to be unsustainable.  One cannot forever increase one's debts relative to one's income, which seems to be intuitively obvious to everyone except bankers and conventional economists.  So the music stopped playing one fine day in late September of 2008, and the dream was over even more suddenly than it began.

What had been an unsustainable accumulation of debt just stopped.  Suddenly and irrevocably.  One day the story all made perfect sense, and the next day it did not.  One day Iceland was the fifth on the global list of per-capita wealth; the next it was headed somewhere lower, although how far it will go is yet to be determined. Such is the way of bubbles.

Loud and noisy demonstrations erupted, the usurious menace of the international banking cartel was soundly rejected by a public referendum, and then the good people of Iceland settled down to the business of figuring out the dimensions of their new economic reality.

I was recently in Iceland, by invitation, to give two talks:  one, to a group working on creating sustainable systems in the world, and the other, a public talk at the University that was generously funded by a local world-class entrepreneur.

On my very first taxi ride in the country, I asked the cabbie what he thought of bankers.  "Bankers!" he spat, "I am not a violent man, but if you gave me a gun and lined them up, I would shoot them all!"  Navigating around this outburst, I steered the conversation into safer waters, seeking to find out what he thought was the root of the problem.  In the course of our conversation, I opined that his analysis of "too much debt," with which I heartily agreed, needed to be shaded with the observation that half of that was external debt and much of that was denominated in something other than Icelandic currency (a rookie mistake in international financing, if ever there was one).  He readily agreed, and had numbers at the ready.

As our discussion wound through economic principles, both micro and macro, I wondered how many cabs I would have to get into in my own country, the US, in order to have such a passionate and enlightened conversation about something of such elemental importance as this.  Ten?  A hundred?  A thousand?

Then at the sustainability conference, I happened to sit next to someone who worked at the Icelandic central bank during one session.  How did the bank view itself?  "We are embarrassed and concerned over our some obvious failings," was the response.  The Finance minister gave the opening talk, and echoed this sentiment, displaying honesty, introspection, and humility over what had transpired.  Everywhere I turned, I found the people of Iceland to be knowledgeable about the roots and details of the crisis into which they were plunged and eager to explore the possibilities and consequences to their future.

In short, I was jealous; very, very jealous.

Here is an entire nation of people who are ready to accept that they were living too far beyond their means and conclude that it was time to face the music.  While still mid-journey and in the throes of discomfort (40-70 year-old Icelandic males are presently recorded as being "very angry" by researchers), they are getting on with it.  There are no calls to double down on new national indebtedness to 'get things back to how they were.'  They are not overrun with economists explaining how it would make sense for their central bank to simply flood the world with more Icelandic kronur.  There is no sense that the illusory wealth brought about by the vast accumulation of debt is some sort of natural birthright that must be unquestioningly preserved.

In short, their attitudes and policies are nothing like those in the US.

Upon my return to the US, I was immediately greeted by the news that the recession had somehow ended a year ago, a period of time in which the number of civilians unemployed for 27 weeks or more had increased by 2,000,000+, and also heard that the Federal Reserve was considering expanding its money printing operations (in other words, the return of QE as a policy tool).  These are two highly contradictory pieces of information, when you stop and think about it.  The government is facing a sea of red budgetary ink as far as the eye can see, states are hemorrhaging, and housing continues to slump along.  In all of this, one is hard pressed to find any sort of a conversation that goes like this:  "We overdid it, there, and now it's time to tighten our belts and get used to living within whatever means our economy can actually support."

I could recite an nearly endless litany of facts, quotes and data all supporting the idea that the US is hell-bent on returning itself to a level of economic activity and growth that was provably overdone and unsustainable.

The difficult part for many in the US, including me, is the effort that it takes to maintain a vigilant stance when immersed in such a deep pool of complete denial.  Part of me screams, "Get on with it already!" even as another part of me really does not want to get on with anything at all, preferring to use these steady moments to become better prepared for and more adjusted to whatever the new reality is going to be.

I note with mounting concern that I no longer care about things that used to provide me with much amusement and passion in the past.  It's a form of burnout like we see in movies about war.  The first time a single bullet gets shot past a new platoon, it sparks a vigorous reaction, "My god! That could have hit us! Yikes!" but by the end of the movie, some guys are standing around giving orders and talking to each other as mortars explode nearby and a steady whine of bullets fills the air around them.  They no longer care, because they have been worn down in some elemental way, as if the human brain can only remain on high alert for so long before protecting its internal circuitry by shutting some of it down.  Or perhaps it's simply what biologists call 'habituation' -- the process by which even sea slugs can be taught to ignore mild electrical shocks.  My defense against this process of shutting down is to give talks, meet people, and increase my own personal and community resilience.

Through all of this, I find myself jealous of Iceland, whose natural and cultural resources permit an attainable vision of a stable and prosperous future, and which seems to be getting on with things by closing the gap between its prior excesses and future prospects.

Perhaps the lesson here is that Iceland did not come to its senses entirely on its own and had to be forced by external circumstances to begin this process of adjustment.  Perhaps we should calibrate our expectations about the future based on our assessment of what 'forcing functions' will lead to change in our own countries.  Perhaps that's just the way of the world.

I think I already know what those forcing functions are for the US.  I have a rough sense of their timing.  I just need to constantly remind myself that while vigilance in the face of denial is tiring, it is also necessary.  There is much to be thankful for, and I am grateful for the time that we have been given to prepare ourselves.

All the same, I also wish that we'd get on with it and begin to close the enormous gap between our national expectations and reality.  So, all in all, I am quite ambivalent on the matter.

Iceland has all the pieces it needs to construct a wonderful and sustainable future, and I sincerely hope that it will.  In the meantime, I'll be harboring a sense of jealousy about their head start.

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24 Comments

land2341's picture
land2341
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Re: Jealous of Iceland

Iceland's "revolution" was calmer than our celebration of the World Series win in Philadelphia.   Their culture is much more civilized and adult  than ours here in the US.  They're a  much more pragmatic people who also have a more socialist attitude of everyone being in it together.  There is not nearly the level of class division or ethnic group hatreds there.  Homogeneity breeds a lack of a sense of "others" to blame.  No blame shifting means I have to accept responsibility.

We have so many people we love to hate that there is no time to look in the mirror.

cjlcarmody's picture
cjlcarmody
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Re: Jealous of Iceland

I find it amusing observing from Australia how the US can't acknowledge or prepare itself to cope with being a fadign world power, largely created by its own misuse of its power and wealth. Great Britain was in this position 100 years ago. How can the US continue to believe that 5% of the world's population can continue to use 25% of the world's energy? So much of the Western world view is seen through the eyes of US thinking, but i can't see this happening for much longer. I don't make my comments out of spite, more from a position of amazement, how we all find it hard to make hard choices.

Chris

songbird's picture
songbird
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Re: Jealous of Iceland

I feel sometimes I am on a seesaw between hoping we still have more time to prepare, and wishing we could just get it over with.  Whether the crash is sudden or slow motion, things can't begin to be rebuilt until it happens.  Maybe a sudden crash would be an advantage - would make it much harder to fudge numbers and try to put a good spin on things than it would be with a slowly unfolding situation (as we now have.) While individuals may be prepared, the country as a whole will not change their ways until this thing has hit the bottom and they are forced to change.  I wish this were not the case, but I'm afraid it is.

And yes, I agree with Chris, trying to remain constantly vigilant is exhausting.  I am concerned that I am losing my ability to remain alert, especially when all around me really truly believe that it's all going back to the way it was.  

Doug's picture
Doug
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Re: Jealous of Iceland

Iceland's plight is one of the cases in point in the movie The Secret of Oz.  Definitely worth seeing for those who haven't.  I think the economic system advocated by the narrator, Bill Still, is worth discussing at some length.  I don't know how to embed it here, but here's the link to the Iceland part of the film.

Doug

SagerXX's picture
SagerXX
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Re: Jealous of Iceland

songbird wrote:

And yes, I agree with Chris, trying to remain constantly vigilant is exhausting.  I am concerned that I am losing my ability to remain alert, especially when all around me really truly believe that it's all going back to the way it was.  

I made some comment last week to the effect that I feel like I've been up in the crow's nest on the Titanic for 18 months now and need a break.

Right now I feel tired of the endless efforts to prep and get folks around me on board.  I think this is just a moment in time rather than my new reality.  Had some success over the Summer with friends seeing the light (buying junk silver, storing food), and my wife & I are having a brass-tacks dinner discussion this coming weekend w/some friends that have a 20-acre homestead in the woods near here -- if there's enough vision overlap and the facts of our situations mesh, we're going to join forces w/them.  

So I feel like I'm catching my breath and getting ready for the next couple of big pushes.  But I hear you Songbird.  Ain't none o'this easy.  Or quick.

Viva -- Sager

Davos's picture
Davos
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Re: Jealous of Iceland

Wow!

ashvinp's picture
ashvinp
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Re: Jealous of Iceland

It seems that Iceland's more reality-based psychological response to their debt crisis is a function of less complexity. Their population is 0.1% the size of ours (and their GDP), more homogenous and their rapid economic growth had lasted a lot less time than ours. Their political, cultural and social systems were not calibrated to those expectations for long enough to place them past the psychological point of no return. The relative simplicity of their economy and society allowed them to react to the crisis much more favorably. On the other end of the spectrum, you have the US which is not so much a single nation as a global empire... I am jealous but certainly not surprised.

macro2682's picture
macro2682
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Re: Jealous of Iceland

Cabbies in the US actually know more than you'd expect. Most are foreign, and don't listen to the news in the same way that Americans do. Cab drivers are good multi-taskers - they can listen and think at the same time... All while driving.

Jeff Borsuk's picture
Jeff Borsuk
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Re: Jealous of Iceland

It would be interesting to know what Iceland would do if their overly large debt was denominated in Icelanic currency? Would they institute QE programs like we are doing?

I'm jealous of the fact that most of their debt was external...they didn't have a choice!

We can prolong things long enough to have most people be clueless to what is inevitable.

Then again, I too am enjoying the time to prepare.

Thanks Chris! keep doing what you do.

Jeff

pinecarr's picture
pinecarr
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Re: Jealous of Iceland

Chris, thanks for the great report, and for openly sharing your sentiments.  It helps to know that others are struggling with our un-reality here in the US.  Trying to navigate each day, given the gaping chasm between what you believe in your mind and gut to be true, and what most everything and everyone else around you believes to be true, is stressful to say the least.  It's like living on a fault line that you know, one day, must give!

Thanks also for sharing your experience of iceland.  I was very curious to hear how that went.  I admire the strength of their people to face their reality!

Rector's picture
Rector
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Re: Jealous of Iceland

I often feel the same way and I appreciate you putting my thoughts into words.  Our "special knowledge" colors many of the things I think about and clouds even the simple things in life with a dreadful haze.  I was at dinner last night with some like-minded friends and some new people who were just waking up to the facts.  At the end of our discussion, I was discouraged and exhausted, while the "new" people were all fired up to get ready for a different future.  I felt like a mortician, and still do.

I hate telling people that there is NO FIX.  No solution set.  No "what we ought to do. . ."  We are kinda screwed and I wish it wasn't this way sometimes.  Like you I also wish it would just happen and let the chips fall where they may.

Sorry such a downer post, but I am really bummed today.

Woodman's picture
Woodman
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Re: Jealous of Iceland

Robert Reich's commentary on NPR Marketplace tonight is related to this topic.  He acknowledges structural economic problems we are not addressing but expects Americans to swing back sooner or later, simply because the status quo is unsustainable.

I think we just haven't felt enough pain yet to change.

Read or listen to all at

http://marketplace.publicradio.org/display/web/2010/09/27/pm-reich-america-will-swing-back/

Unlike the 1930s, the Great Depression, when we went into the Great Recession, when we actually saw things starting to fall apart, we knew enough and had learned enough from the Great Depression to do all of the things that they did not do in the 1930s and should've done in the 1930s to avoid the collapse. But the paradox is, that by doing all of this, by avoiding that financial collapse, we in a sense avoided and took away the degree of political will, the kind of political pressure to do something more dramatic about income and equality that is really at the root of all of this.

American history tells us over and over again, over and over again, that Americans, unlike many other cultures and societies, when the going gets hard, we put ideology aside. We roll up our sleeves, we figure out what needs to be done and we do it.

rhare's picture
rhare
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Re: Jealous of Iceland

I agree with ashvinp (wow - it really happened) that Iceland had such a short lived "run up" and "fall down" that it was obvious to most Icelanders why the crisis occured.  In the US we have been on this road for multiple generations.  Since at least 1913 when we begin the slow degredation of our currency to the accelaration and empire after WWII when we ended up as the worlds reserve currency.  All these have hidden the signs of crisis from Americans, and actually much of the world who don't see the house of cards in the US or their own countries.   I think it will take a few more shocks for the majority of the populus to realize the seriousness of the problem - particularly those who blindly trust the news and government cheerleading.

However, I do think there are far more people aware of at least the economic ill's we face.  I find I'm constantly amazed at the number of people I run across who are willing to talk about economics and who actually have a pretty good grasp of the unsustainability.  It makes it much easier to to start discussing the other two E's and introduce them to the Crash Course.  Many people even if they realize the economy is never coming back, they are still not ready to accept it.  Even I can see the writing on the wall and have been prepping, but I know parts of me are still living the dream....

Pass the blue pills please!.

Damnthematrix's picture
Damnthematrix
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Re: Jealous of Iceland

I note with mounting concern that I no longer care about things that used to provide me with much amusement and passion in the past.

Wow Chris.......  that's EXACTLY how I feel these days.

Mike

rhare's picture
rhare
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Re: Jealous of Iceland

cmartenson and Damnthematrix wrote:
I note with mounting concern that I no longer care about things that used to provide me with much amusement and passion in the past.

I find that to sometimes be the case, then I try to take advantage of all the things we have now.  Enjoy them while you can.  Travel, go to amusement parks, enjoy food from far away, go for a drive....  All things that you might not be able to do tomorrow. 

Carpe diem, quam minimum credula postero  (Seize the day, trusting as little as possible in the future)

SingleSpeak's picture
SingleSpeak
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Re: Jealous of Iceland

Taking a walk on a nice day seems more enjoyable now than any trip to an amusement park. I think it's partially due to getting older, but mostly getting used to the (inevitable) new normal.

WurmD's picture
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Re: Jealous of Iceland

SagerXX wrote:

Right now I feel tired of the endless efforts to prep and get folks around me on board.  I think this is just a moment in time rather than my new reality.  Had some success over the Summer with friends seeing the light (buying junk silver, storing food),

:( storing is not enough right? Storing is betting the stockpile will last until the bad times pass... How long will that be? How big must such a stockpile be?

Using this time to become self-sustainable would be a safer bet wouldn't you agree? At least self-sustainable in food and water production. And using this time to become able to teach others to attain such self-sustainability would be ideal. If we ever devolve into a "wild-west", a stockpile will tempt robbery, while a production center plus a teacher.. i hope will promote community building and compel others to protect us.

About building a completely self sustainable home I refer to the film "Garbage Warrior" http://www.garbagewarrior.com/ (I watched it online) and to the worldwide community that has formed around it.

Cheers for a not-dark future,

Dario

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TheRemnant
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Re: Jealous of Iceland

Hopefully the people of Iceland will understand to never ascribe legitimacy to debt-based fiat currency ever again.

People should be free to choose what they want to use as money and no-one should have a monopoly on it's production.

SagerXX's picture
SagerXX
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Re: Jealous of Iceland

WurmD wrote:

SagerXX wrote:

Right now I feel tired of the endless efforts to prep and get folks around me on board.  I think this is just a moment in time rather than my new reality.  Had some success over the Summer with friends seeing the light (buying junk silver, storing food),

:( storing is not enough right? Storing is betting the stockpile will last until the bad times pass... How long will that be? How big must such a stockpile be?

Using this time to become self-sustainable would be a safer bet wouldn't you agree? At least self-sustainable in food and water production. And using this time to become able to teach others to attain such self-sustainability would be ideal. If we ever devolve into a "wild-west", a stockpile will tempt robbery, while a production center plus a teacher.. i hope will promote community building and compel others to protect us.

Hey Dario --

If you check out the Community Building thread --

http://www.peakprosperity.com/forum/community-building/15712

-- you'll see that I'm working hard (as are others here at CM.com) on sustainability for food/water/energy, etc. 

What I've found is that community is the hardest of all the preps and the most time-intensive -- not only does it take a lot of time but in many ways it can't be rushed...

So I'm building up my cushion of food, etc., while I'm working on a bigger-picture sustainability.  It takes many threads to make a strong weave.

Viva -- Sager

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Davos
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Wendy S. Delmater's picture
Wendy S. Delmater
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Re: Jealous of Iceland

Gosh, yes Dr. Chris. Prepper burnout.

But we still went out and harversted the peanuts and soybeans, and planted more sweet potaotes. We have more sustainable hobbies now: gardening, grinding out own flour and making out bread, playing with the mouser cat and a piece of string. Our group gets together and shares tips and tweaks to get ready for the inevitable. We take simple pleasure in not having to turn on lights and appliances, which help us get ready for the new normal.

It's probably the calm before the storm, or a quiet plateau on the stair-step graph down. I'm burnt out, but I am using the time as best I can - and so are you.

Doug's picture
Doug
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Re: Jealous of Iceland

http://www.bloomberg.com/news/2010-09-28/iceland-s-lawmakers-to-vote-on-indictment-of-former-prime-minister-haarde.html

Quote:

Iceland’s former Prime Minister Geir H. Haarde, who led the island from boom to bust two years ago, was indicted by lawmakers for his role in the economic collapse, the first time in the country’s history that such a case will be heard.

Parliament voted 33 to 30 to charge Haarde, 59, in Reykjavik yesterday. Lawmakers decided not to charge former Finance Minister Arni M. Mathiesen, former Business Minister Bjorgvin G. Sigurdsson and former Foreign Minister Ingibjorg Solrun Gisladottir. The indictment is the first time a special court set up in 1905 to hear such cases will be convened.

The 2008 banking failure forced the island, the world’s fifth-richest per capita a year earlier, to turn to the International Monetary Fund for help and sent the krona plunging as much as 80 percent against the euro in the offshore market. Lawmakers had been debating the issue of whether to move against individual political leaders since a parliamentary committee on Sept. 11 recommended the four be charged.

At least they have courage and good sense to go after the miscreants legally.  At worst, ours will retire wealthy, a fate I can only dream of.Undecided

Doug

 
Full Moon's picture
Full Moon
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Re: Jealous of Iceland

We can be happy for Iceland .   For our selves we will be as busy as a cat covering pooh  until  we are free of the debts .   Being aware of and  counting the blessings we do have helps us a lot .  Keeping the goal in mind helps too but .... Today is beautiful !  I am calling my  grand-kids , my kids,  my parents ,and we are going to picnic in the yard . We are going to joke around , tease each other, and laugh a lot .   I know I am simple , I know it solves absolutely nothing , but sometimes you just feel lead to slow down and put  family time  first . 

FM

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mahtay
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Re: Jealous of Iceland

land2341 wrote:

Their culture is much more civilized and adult  than ours here in the US.  

It is often said that America went from Barbarism to Decadence without first experiencing Civilisation. European countries have had a long time to learn how to get along with each other and the ramifications of war. America is isolated geographically, enough so that the consequences of it's actions are not sensed by its citizens.

It seems the American elite have only reaped benefit from war and still see it as an economic stimulus...

Unfortunately for its citizenry, America's demise (read tectonic sociological/geopolitical shift) will actually come as a shock to them.

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