Monday, July 27, 2009

The porteños of Iceland

We all know about how Iceland pulled a double Argentina with a nordic half-twist back in the fall, and I remember thinking I should take a trip over their to check out apartments. NC has an update on the situation post-default.

So how is Iceland faring now? One would assume still broke and chastened. One would be dead wrong.

The krona is down 50% from its peak, and it seems to have sparked a speedy revival. I remarked when Iceland fell apart that someone should swoop in and buy a business that sold strictly in international markets (I had thought fish oil would be a good candidate). But that takes time, legwork, and walking around money.

The Ambrose Evans-Pritchard article she goes on to cite is true to his histrionic style of course, and doesn't mention that devaluing the currency 50% does mean that things are cheaper and can recover more quickly, but it also means that the average person has 50% less real money in their bank account (or pays twice as much for everything that comes from outside the country, which, in the case of Iceland, appears to be everything except pickled herring and ... well ... ice). I also don't understand how you let this go without a mention of the unemployment rate. But still, it's probably true that the inflation created in this manner is less pernicious than the creeping multi-year kind.

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