Pineapple and Aphasia

A few months ago, the New Yorker had an essay on the presidential elections in Iceland.  I know, the most followed news item ever! ;)  I loved that essay.  It was an awesome read.  It was so neat that the country was so laid back about its candidates and the elections.  But more than the elections, it was the description of the country and its peoples that was so charming and memorable; I tracked it down for your pleasure, dear reader:

“Icelanders suffer from ecstatic numerical aphasia”

If you are like me--and I hope you are not--you want to re-check your understanding of the world "aphasia."  Google says it means "loss of ability to understand or express speech, caused by brain damage."  Or, if you want a one-word synonymn: trump! ;)

So, why that ecstatic numerical aphasia?  Here is that awesome paragraph:

In thinking about Iceland, one is always whipsawed between two facts. On the one hand, there’s the tiny scale of the place. There are only three hundred thousand-plus people in the country, and a Presidential election, even though it gets a huge, Nordic-style turnout, will still top out at about two hundred and forty thousand voters, about one-third the number in a single congressional district in New York City. One might read that, as a proportion of the population, more Icelanders died in the Second World War than Americans did, which means two hundred and thirty, most of them in seafaring accidents. “Icelanders suffer from ecstatic numerical aphasia” is the way that Heiða Helgadóttir, a prominent alternative politician, put it one morning, over milky coffee, the country’s vin ordinaire. “We are convinced that we come from a country of at least two or three million, and nothing dissuades us.” On the other hand, Iceland is an honest-to-God country, not a principality, like Monaco, or a fragment fallen off a larger one, like Montenegro. It has a language and a history and a culture entirely its own, it fields competitive teams in international football tournaments, and it can claim about as many famous artists—Björk, Sigur Rós—as its far larger Nordic peers.

Doesn't that one paragraph capture the country for us?  Those damn New Yorker writers; I am always jealous of them!

That essay was from last summer.    Why blog about it after all these months?  That essay was about a candidate named Guðni Jóhannesson.  I was reminded of that piece because this Jóhannesson was in the news.  Not because he trashed trump's aphasia ;)  But, because he--get this--ridiculed pineapple as a pizza topping!!!

In answering questions from students about pizza and football (his favorite Premier League team is Manchester United), Mr. Johannesson told them that, should he be able to pass laws, he would like to ban pineapple as a pizza topping, igniting a media firestorm.

A global outrage.  Like how trump's tweets cause havoc :)

In his "apology" the professor-president triggered even more outrage:

“I like pineapples, just not on pizza. I do not have the power to make laws which forbid people to put pineapples on their pizza. I am glad that I do not hold such power. Presidents should not have unlimited power. I would not want to hold this position if I could pass laws forbidding that which I don’t like. I would not want to live in such a country. For pizzas, I recommend seafood.”

Wait, what on pizza?

the president used the word “fiskmeti” in the Icelandic-language version of his post, which translates as fish-products, rather than seafood.

Like Adam Gopnik noted,

“Icelanders suffer from ecstatic numerical aphasia”

Don't worry about the presidents' political life though:

Despite stepping into this controversy, Mr. Johannesson’s approval ratings have remained high.
A former history professor at the University of Iceland with a laid-back style, he has turned down a 20 percent pay hike, donated 10 percent of his pretax salary to charity, and holds the distinction of being the first president to march in a gay pride parade.

How cool!

All quiet on the Western Front--air space, that is

Notice that according to FlightRadar the only air traffic is in the southernmost parts of Europe?

During the ride from the AAG meetings/hotel to the airport, a fellow passenger in the van was a scholar from Switzerland.  His flight was, of course, canceled.  But, he was heading to the airport because he figured that going to the airport would take less time than being on the phone--apparently the system told him that the projected wait time, due to call volumes, was at least 75 minutes!

Meanwhile, even as we were only half way to the airport, he got a message from his collaborator that Friday would be the earliest he would be able to leave.  This is the second time he has been stranded like this--he was apparently vacationing in the US when the events of 9/11 unfolded :(

A day earlier, at a talk, I was sitting adjacent to a group of grad students from Scandinavia--they seemed to be happy at the thought of an extended visit in the US for which their universities cannot fault them.  I tell you, it all depends on where you are viewing the event from .... perspectives do differ ....

The best comment I overheard at the conference related to all these?  Hasn't Iceland caused enough troubles even before this volcanic eruption? Obviously, the reference was to Iceland's role in gambling banking

Iceland pays for its banking mistakes!

Remember all that analysis of how Iceland played fast and loose with the mortgages that were all packaged up, and how when the bubble burst their banks owed way more than what their GNP itself was?  Iceland was one huge ponzi scheme by itself?
Irony then in the latest development.  Of all businesses, McDonald's decides that it needs to shut down its three burger joints there!:

the restaurants imported the goods from Germany, but that costs had almost doubled, with the falling krona making imports prohibitively expensive.
Mr Ogmundsson said the restaurants had "never been this busy before... but at the same time profits have never been lower".
"It just makes no sense. For a kilo of onion, imported from Germany, I'm paying the equivalent of a bottle of good whisky,"

No, not the McD's!!!

Iceland. Bankers. Photos. Urinals.

Yes, that is the plot outline. (click here if you want some background on Iceland's problems). And, the result? (thanks to Krugman's blog for this link; looks like he had way too much fun with the title of his post!!!)


Photographs of bankers who left Iceland after the financial crisis have a new use in the restroom of a bar in Reykjavik, the capital.

Iceland is a hedge fund. That sounds right.

Iceland was entirely new to his experience: a nation of extremely well-to-do (No. 1 in the United Nations’ 2008 Human Development Index), well-educated, historically rational human beings who had organized themselves to commit one of the single greatest acts of madness in financial history. “You have to understand,” he told me, “Iceland is no longer a country. It is a hedge fund.”

Isn't that a wonderful description of Iceland during its go-go-years between 2002 and 2008? That quote was from this lengthy piece in Vanity Fair.

The article seems so surreal--could such things have really happened? How could the global economy have become such a grand ponzi scheme? I mean, take this excerpt, for instance:

On February 3, Tony Shearer, the former C.E.O. of a British merchant bank called Singer and Friedlander, offered a glimpse of the inside, when he appeared before a House of Commons committee to describe his bizarre experience of being acquired by an Icelandic bank.

Singer and Friedlander had been around since 1907 and was famous for, among other things, giving George Soros his start. In November 2003, Shearer learned that Kaupthing, of whose existence he was totally unaware, had just taken a 9.5 percent stake in his bank. Normally, when a bank tries to buy another bank, it seeks to learn something about it. Shearer offered to meet with Kaupthing’s chairman, Sigurdur Einarsson; Einarsson had no interest. (Einarsson declined to be interviewed by Vanity Fair.) When Kaupthing raised its stake to 19.5 percent, Shearer finally flew to Reykjavík to see who on earth these Icelanders were. “They were very different,” he told the House of Commons committee. “They ran their business in a very strange way. Everyone there was incredibly young. They were all from the same community in Reykjavík. And they had no idea what they were doing.”

He examined Kaupthing’s annual reports and discovered some amazing facts: This giant international bank had only one board member who was not Icelandic, for instance. Its directors all had four-year contracts, and the bank had lent them £19 million to buy shares in Kaupthing, along with options to sell those shares back to the bank at a guaranteed profit. Virtually the entire bank’s stated profits were caused by its marking up assets it had bought at inflated prices. “The actual amount of profits that were coming from what I’d call banking was less than 10 percent,” said Shearer.

In a sane world the British regulators would have stopped the new Icelandic financiers from devouring the ancient British merchant bank. Instead, the regulators ignored a letter Shearer wrote to them. A year later, in January 2005, he received a phone call from the British takeover panel. “They wanted to know,” says Shearer, “why our share price had risen so rapidly over the past couple of days. So I laughed and said, ‘I think you’ll find the reason is that Mr. Einarsson, the chairman of Kaupthing, said two days ago, like an idiot, that he was going to make a bid for Singer and Friedlander.’” In August 2005, Singer and Friedlander became Kaupthing Singer and Friedlander, and Shearer quit, he said, out of fear of what might happen to his reputation if he stayed. In October 2008, Kaupthing Singer and Friedlander went bust.

In spite of all this, when Tony Shearer was pressed by the House of Commons to characterize the Icelanders as mere street hustlers, he refused. “They were all highly educated people,” he said in a tone of amazement.

And later this on the foreigners who jumped in:

You didn’t need to be Icelandic to join the cult of the Icelandic banker. German banks put $21 billion into Icelandic banks. The Netherlands gave them $305 million, and Sweden kicked in $400 million. U.K. investors, lured by the eye-popping 14 percent annual returns, forked over $30 billion—$28 billion from companies and individuals and the rest from pension funds, hospitals, universities, and other public institutions. Oxford University alone lost $50 million.

Interestingly enough, the latest issue of the New Yorker also has a piece on Iceland and its financial debacle. I wish the two authors and the two magazines had worked together--because they are so much similar, even in the writing styles! One interesting aspect in the New Yorker article, when it discusses the protests:

From the foot of the statue, Edward Huijbens, a geographer who teaches at the University of Akureyri, in northern Iceland, spoke briefly. In his thirties, he was a neatly Bolshevik figure, wearing a black fur hat, a white shirt, and a dark tie.

More power to geographers :-)

Iceland's deep freeze

From the blog at the Economist:
Iceland’s entire banking system is ruined. In addition to the usual domestic credit shock, this financial sector collapse is causing havoc to the import and export sectors, which are crucial to this small open economy. International bank transfers are difficult. Capital controls are in place; a multiple exchange-rate system is operating. Many companies are facing bankruptcy. Others are thinking of moving abroad. Polls show that a third of the population is considering emigration.

The International Monetary Fund has promised aid, but the Dutch and British governments are demanding compensation for citizens that deposited billions in an Icelandic bank’s high-interest saving accounts. Since Iceland’s GDP is down 65% in euro terms, repayment is unlikely—especially if the nation’s best and brightest move abroad to escape the shock and growing tax burdens. This has happened before. The Great Irish Famine triggered a mass emigration shock which tipped the nation into a downward spiral; population fell in most counties from 1840 to 1961, according to O’Grada and O'Rourke (1997).

I learned all this from a fascinating Vox column posted 12 November by Jon Danielsson, who is a Reader (professor, in American English) of finance at the LSE. Here’s the most sobering bit:

In this crisis, the strength of a bank’s balance sheet is of little consequence. What matters is the explicit or implicit guarantee provided by the state to the banks to back up their assets and provide liquidity. Therefore, the size of the state relative to the size of the banks becomes the crucial factor. If the banks become too big to save, their failure becomes a self-fulfilling prophecy.

That’s worth paraphrasing: If banks are too big to save, failure is a self-fulfilling prophecy. There are several European nations with banks their taxpayers could not save.

Donald Trump buys Iceland

The ultimate worry about the global economic collapse?

Remember how much members of the House and Senate seem to be rattled after their meeting with Paulson and Bernanke a couple of weeks ago? I don't know what happened behind those doors, but at least this commentary on how things are unfolding in Iceland suggests that members of Congress might have been briefed on some really scary, and probable, scenarios:

[They] couldn't anticipate that when a tiny country bails out a bank whose assets vastly exceed the country's own GDP, then the sovereign itself loses much creditworthiness. One scary datapoint: the assets of Kaupthing Bank amount to 623% of Iceland's GDP, which is possibly why its own credit default swaps are trading somewhere over 2500bp.
How bad can things get in Iceland?
Here's what one local emailed Tom Braithwaite:
They are fighting powers that they are powerless to fight. It's like tackling a storm raging in the sea with a teaspoon.The main supermarket can't get imported goods because they have no currency. The shops are half empty. One of the store managers has advised people to start hoarding. We're running out of oil. And winter came last night - about a month early.

Tyler Cowen has a link to the Financial Times that has a list of European banks with assets greater than the gdp of their respective home countries. UBS, which was one of the earliest banks to admit to its messed up books, had assets that were 484% of the Swiss GDP!