Tuesday, October 14, 2008

More On Iceland

In contrast to other stock markets this week, what's left of the Icelandic stock market plunged 77%(!) today after trading resumed after having been suspended for three days. That mostly reflects the fact that the stocks of the nationalized banks have been become worthless.

Bloomberg also has an interesting story on how the collapse of the Icelandic krona is causing a collapse in the Icelandic economy, both by creating massive inflation and also by causing the krona value of the foreign currency debt to soar. I made those same points in my recent post on Iceland, so that's not really news for regular readers, but the story is still worth reading as it provides more background and specific cases of people hit.


Blogger pej said...

I would rather say that the collapse of the Icelandic economy has caused the collapse of the krona instead of the opposite :-)

I am not even sure we can call it an economy, it was only smoke and mirror...

6:33 PM  
Blogger stefankarlsson said...

Well, there were underlying problems that caused the krona to start falling, but that has triggered a vicious spiral where a weaker economy causes the krona to become weaker which in turn make the economy even weaker.

6:54 PM  
Anonymous Per Johansson said...

It has been a couple of years now of speculations that Iceland may want to drop its own currency and use the euro instead, and perhaps even join the EU. The latest developments might speed up the process.

8:52 PM  
Anonymous malavel said...

The 76% fall was due to the three big banks being put at zero value since they were still not traded.

7:51 PM  
Blogger stefankarlsson said...

I know, malavel. I wrote it in the post.

7:55 PM  

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