Later I mentioned – but only in the comments – the raid on the
I wrote a post about high rate deposits (Wachovia will walk over you) and I confess that I had an ulterior motive – I was looking for someone to tell me how much the Icelandic banks were raiding the deposit market of
But this post is an ex-post analysis of just how absurd
Firstly the Russian loan (5.4 billion) is really big. The population of
It is pretty hard to see how an economy that has functionally destroyed itself is going to pay that back. Whatever it looks like a darn big loan to a very dodgy credit – and I presume that there is a non-financial motive for granting it.
In my quick post on
That is plausible because there is no obvious financial motive for this loan. But there is an alternative theory doing the rounds – which is that one of the Icelandic banks was closely tied to the Russian Mafia – and the loan by the Russian Government is just make-good. [The implication being that the Russian Government is just another arm of the Russian Mafia.] Again I have no proof for that hypothesis – however as you need a non-commercial explanation of the loan its as good as most. [Access to military bases however looks more likely…]
But you got to realise just how big the Icelandic problem is relative to the Icelandic economy. Kaupthing Edge and IceSavings raided the
Bakkavör Group sticks in mind – just because it was so levered in such an ordinary business – processed fresh food. The five year summary is as follows:
Yes – it does have quick ratios of less than one, current ratios of less than one and ebit of only about a ninth of outstanding debt.
It might be possible to survive that – but it will be tough.
And whilst the investment bank is Kaupthing with whom it shares multiple board members – the list of “principal bankers” contains more usual suspects – they are Barclays, RBOS, Rabobank, Mizuho, Fortis, ABN Amro, Bank of America Securities and HSBC.
It is also worth considering what happens to Iceland in the absence of new funding... It has no banking system left. There is nobody much willing to take Icelandic Kroner. The country has no reserves of hard cash that matter. Its winter coming.
They can sell fish and energy intensive manufactures (their main exports) for hard currency. But this is not like Australia - when the going got really tough in Australia in the depression you gave up and went and hunted (feral) rabbits for food.
Iceland is a little colder.
My guess - and it said only half in cynicism - the women are beautiful in Iceland - the place just pushes out Miss World winners. Its almost as close to NYC as Vegas. Sex Tourism for hard cash will be their next export industry.
If they adopt the Vegas slogan will it work for financial crisis as well? What happens in Iceland/Vegas ...