Saturday, March 20, 2010

Iceland Review Pt 2

One of D's friends when he found out I was going to Iceland exclaimed "Why would she want to do that? Aren't they a 3rd world country now?" It seems like a lot of people (except me) knew about their economical collapse a few years ago.

I had a chance to ask the owner of my apartment what happened? She told me that due to corruption and over confidence in the government, the country's monies were being wasted and businesses (mainly banks) were allowed to loan money to people who really shouldn't be borrowing.

Sounds familiar. So I asked if it was similar to what happened in North America, Europe etc? She said that it is worse. The amounts that have been leveraged is higher per capita. They have been living big.

Home prices are down 50% still and their mortgage rates are now linked to inflation and are in the double digits. Their currency has plummeted. The President has been replaced and most of the known corrupt politicians etc. have left for Norway.

People were buying holiday homes on lines of credit from the European branches of their banks in Euro because it was cheaper than their Krona. People had been spending 170% of what they made. Many housing and condo projects have been left midway and some people who have bought there are living without services.

Icelanders have enjoyed a standard of living that is much higher than some of the largest cities in Europe. They like to spend and buy the best. They also have no issue with debt. They work hard and many will voluntarily continue working until they are in their 70's.

A stroll down their main shopping street showcases fine clothing boutiques, people dressed really well and lots of nice, well maintained cars. They are a people who are highly educated and literate. They publish and buy more books per capita than any other country in the world.

I got a distinct impression, right from the start at the airport, that they may not really welcome visitors and wish to keep their country to themselves. They until recently, have not been interested in joining the European Union.

All the travellers I met exclaimed the same thing -- they had not been able to come to Iceland before because it was so expensive. Without knowing, I managed to plan my trip at a time where things are a few multiples cheaper.

There is a movement back to what Icelanders consider to be the core of who they are -- Total Personal Responsibility. More next post.


  1. Icesave was one of the recommended places to invest here. Most people didn't even realise it was in Iceland and so only partially covered by UK regulations. Charities and local authorities put there money there. Our local hospice, Naomi House, lost £2million. I wouldn't have worried about the big bankers losing out but the charities had an awful time.
    Fascinating place to visit though, by the look of your photos.

  2. That's very informative. I had no idea. I guess I need to read more world news. But it does should familiar ~ so many people living large because of easy credit. I'm surprised they don't want more tourists/visitors to bring money into their country.

  3. Have you seen this MW?

  4. Hi Lizzie;

    I'm still in shock about the eruption. Thanks again for letting me know.

    I read about the Icesave accounts but didn't know it was open to everyone.

    Most Icelanders have begrudgingly opened one even though they don't like the idea of bailing out other people's mistakes.

    Hi Sandra!

    I thought it seem strange the idea of not wanting a lot of tourists. But after a few days there, I believe a large part of it is pride. They don't want to be looked down upon as a nation.

  5. I'm currently reading 'Hot, Flat and Crowded...' Thomas L Friedman {NY Times} and it's really helped me to understand the recession and how countries like Iceland got into so much trouble {and the people with money in their banks}'s worth a read :-)

  6. Thanks Laura -- I found it at our local library!