Reykjavík Grapevine - 06.11.2009, Page 6

I know where yams come from. I can
name every country through which
the Danube runs. I can even bake
a quiche from scratch. But when it
comes to monetary policy, financial
indexation, so-called external shocks
and wage formation, I feel like a
beached whale. A rotting beached
whale. Asking around for answers
led to the realisation that the general
population is equally informed about
these subjects—which is to say not
at all. We are a pod of putrid beached
whales. This is dangerous in a country
that has experienced one of the most
severe economic collapses in modern
history—a country where money and
the economy sometimes feel like the
only relevant topics of conversation.
I tried to address the issue by
starting from a familiar, but too-often
empty locale—my wallet. My question
was simple: How come I have 3 grand
in my pocket and still feel like a pauper?
“I’M MUCH Too FAST To TAkE
THAT TEST”
The simplest answer to that question
is inflation, or the steady rise in
the general price of goods and
services and the subsequent erosion
of a currency’s purchasing power.
The general consensus between
economists is that inflation is not
altogether a negative phenomenon, but
a natural by-product of the economy
and dependent on wages, prices for
goods and interest rates. Inflation has
both pros (debt relief, the balancing of
labour markets) and cons (purchasing
power and investment uncertainty).
Most countries aim for low inflation,
somewhere in the 1%–3% range.
Extreme inflation, on the
other hand—otherwise known as
“hyperinflation”—tends to have
catastrophic effects. Commonly
defined as a cumulative inflation
rate of 100% over three years,
hyperinflation is characterized by a
central bank printing successively
greater denominations of currency,
rendering previous bills worthless. The
best example of hyperinflation might
be Hungary during the summer of
1946, when the post-war government
crumpled under an inflation rate
of 41.900,000,000,000,000%—the
highest ever recorded. The value of
the Hungarian pengo doubled nearly
every 13 hours and led to the printing
of the largest banknote denomination
ever issued: the 100 quintillion
(100,000,000,000,000,000,000) pengo
note.
While the Icelandic króna has
never reached such eye-gouging
extremes, the history of Iceland’s
currency is volatile enough to lead a
number of experts to question whether
the country shouldn’t abandon it
altogether.
“AND MY TIME WAS RUNNING
WILD”
Throughout the post-war period,
Iceland’s inflation has been well
above the average of other members
OECD (the Organization for Economic
Co-operation and Development, a
collection of democratic, free-market
economies). From 1945 to 1973, yearly
inflation hovered in the moderate 10–
15% range.
All that changed in the early 70s.
With a population of just over 200.000
and an economy dependent on
export trade, Iceland was particularly
vulnerable to the oil crisis of 1973.
Import prices grew and inflation
followed fast on its tracks. A second
oil shock in 1980 only exacerbated the
situation. A fall in the fish catch of 1982
was the third wheel of an inflation
tricycle wildly out of control. Although
the government cut two zeroes off the
króna in 1981 in order to maintain
some sense of normalcy, no substantial
policy steps were taken to address the
issue.
By the early months of 1983,
inflation was pushing 100%. Bjarni
Brynjólfsson, editor of the Iceland
Review, recalled the era in a 2008
opinion piece:
“I remember getting a weekly pay
in cash and the envelope was as thick
as a leather wallet. It was a jolly good
time. You felt like a king but the many
krónas were swiftly washed away as
prices kept getting higher. “
Hyperinflation loomed on the
horizon and the government was
forced to take a number of stabilizing
measures: a temporary suspension
of wage indexation, a ceiling on
wage increases and a compensatory
social security and tax exchange to
protect individuals. In early 1990,
a historic agreement was reached:
wage increases would be severely
limited nationwide in exchange for
the government’s promise to curb
inflation. Miraculously, it worked.
Inflation dropped to reasonable
figures and remained that way until
2008, when the króna and the Icelandic
economy went to hell in a hand basket.
“The króna fell like a stone” Ólafur
Ísleifsson, assistant professor at
Reykjavík University’s business school,
recently said. He wasn’t exaggerating:
the króna lost half of its value in a
matter of days. Inflation reared its ugly
head again and topped out at over 18%
as Icelanders wearily celebrated the
arrival of 2009.
“CH-CH-CH-CHANGES, JUST
GoNNA HAvE To BE A DIFFERENT
MAN”
“The basic economic lesson is that a
free-floating currency in the smallest
currency area known to man—
consisting of 300,000 people—is a
recipe for disaster,” Ólafur commented.
“I think that history suggests quite
strongly that we would have been
better off if we had accepted the offer
in 1993 to get into the fast track for EU
membership. If we had had the Euro,
the economic collapse of 2008 would
not have happened.”
Looking ahead, assistant professor
Katrín Ólafsdóttir, Ólafur’s colleague
at the University, goes one step further:
“I don’t think there’s a future for the
króna. Absolutely not.
We should do whatever we can to
change the currency to the Euro—the
sooner, the better... Yes, we would have
less economic growth, but we’d also be
more stable."
With a recent poll indicating less
than a third of Icelanders wanting to
join the EU—much less adopting the
Euro—that switch might be easier
imagined than realized any time soon.
Until then, we might as well indulge in
all the zeros in our pockets.
Article | Currency opinion | Sigtryggur Baldursson
6
The Reykjavík Grapevine
Issue 17 — 2009
Inflated Crowns
“She’s fat, she’s thin, she’s fat, she’s thin – I mean,
come on, pick a body and go with it!” - Jerry Seinfeld on
Oprah, Saturday Night Live, 1992
Welcome to Iceland
Here’s how to find
www.ja.is
WHAT?
WHO? WHERE?
People Businesses Maps Direction
Quick guide to the information
you need while enjoying your stay
MICHAEL ZELENko
It’s a tad sad that topics of
discussion on band tours tend
to get increasingly scatological
as they progress. Maybe it’s the
ever-smelly toilet on the bus or the persistent
smell of morning farts that tends to linger
on the top floor of the tour bus, incidentally
where the folks do their sleeping.
The worst instances involve a still
morning, as they are called, when you wake
up sweating in your coffin. This happens
when you don’t have air blowing into your
bunk, which is screened off with curtains and
normally very cosy when properly ventilated.
However, sometimes the engine is turned
off—effectively shutting off the air supply. The
bus may have been sitting in a location in front
of a venue for hours or local staff might have
bungled the ever important power cable that
is supposed to be sitting outside the venue,
ready to hook up to the bus, so as to keep the
air flowing.
God help you if the above fails, and the
sun has been shining on the top of the bus for
hours. You wake up in something resembling
a cross between a sauna and a foul crypt.
Seeing as bus toilets are merely designed
for number one rather than number two,
queues tend to form for the venue toilets
when people rise to their feet in the morning.
These gatherings naturally tend to bring out
stories connected with the matter at hand,
and so the stories come like laxative.
I will spare you the details, but will include
a wonderful story that is nicely unconnected
to the bus at hand, yet takes the cake so to
speak in stories of this sordid, often comical
nature.
No matter how lofty you want to get, you
can always laugh at a good poo story. My
friend, the brilliant Icelandic saxophonist and
recent knitwear fashion mogul Jóel Pálsson,
told me this one a few years ago. Some years
ago, he was lounging in a seedy jazz joint
in lower Manhattan, listening to one of his
heroes blow the horn, as one does. During the
intermission, he wandered down to the men’s
toilet to relieve himself of a few beers, also as
one does.
As he is standing by the urinal tending
to the business at hand, an older man of
indiscriminate age enters the men’s room and
takes a stance by the urinal right next to our
man. He was obviously drunk, and his state
indicated he had probably been that way for
quite a while. He had on a very dirty white
suit, stained to perfection, and mumbled an
incoherent sax solo as he proceeded to relieve
himself. As everyone knows, the unwritten
law of men’s rooms states that you never
stand right next to a guy at the urinal if it can
be avoided. Personal space and all that jazz.
The man in the white suit is obviously in his
own little world, which happens if you drink
enough.
Jóel minds his own business, making an
effort to not look at the guy next to him. The
guy lets out a huge fart while urinating and
humming and Jóel tries hard not to breathe,
concentrating on looking at his shoes. This
leads him to notice the man’s shoes are of a
tattered brown variety, and around the left
one a small yellowish-brown puddle is slowly
forming. At this disgusting revelation, Jóel
loses his concentration and sneaks a look
at the man next to him, who is ready for that
look and says with a demonic grin: “I gambled,
and I lost!” That phrase has since become a
classic amongst my travelling companions.
Áfram veginn!
Twelve volumes and counting, with no end in
sight, Fables by Bill Willingham is probably
Vertigo’s finest on-going series. It tells the
story of a particularly special community of
immigrants in New York—namely, characters
out of fables. Snow White, Prince Charming,
Beauty, Beast, Pinocchio, the big bad wolf
and basically every other one you can think
of. These fine people have been disguised
as New Yorkers for over a century now, ever
since an unknown adversary forced them out
of the fairytale lands.
It’s like if all your favourite fairytale
characters were produced by HBO. Sex,
violence and soap opera. And above all:
wonderful characters. That’s all a good story
needs, really. Fantastical characters that
feel like real people. You know, like in Buffy.
Willingham’s ability to make you care about
whether Snow White and Bigby Wolf end up
together, or whether Prince Charming will
one day outgrow being a douche, is close
to magic. Pick up the first volume now, and
it’s pretty much guaranteed that you’ll be
spending your last dope money on the twelfth
volume within a month.
But that’s not all. For those of us who
can’t get enough of contemporary fantasy,
there’s also a Fables spin-off. Jack of Fables
(up to 6 volumes now) follows the Loki / Han
Solo / trickster type of the Fableverse: Jack
(the one from Jack and the Beanstalk). A
narcissistic con-man who’s hard to love but
even harder to loathe. His exploits are not as
beautifully written as the Fables, but a fun,
fun, fun addition to a lovely, well crafted, good
old fashioned comic book universe for people
who like their entertainment smart.
Topological Travelogue
“We are a pod of putrid
beached whales”
Comix | Review
Absolutely
Fable-ous!
Fables and Jack of Fables
By Bill Willingham
and various artists
HUGLEIkUR DAGSSoN
Even though undergoing 'extreme inflation' is probably a pretty bad deal, it would still be kinda
cool to see what they'd put on a hundred trillion ISK note. And think of all the job openings for
designers and illustrators?