Iceland review - 2014, Qupperneq 44

42 ICELAND REVIEW
ECONOmY
tion with matching exorbitant interest rates, but this isn’t really
that bad. But remember that in 1981 Iceland changed its currency
from króna to “new” króna and knocked two zeros off—not quite
as drastic as the zimbabwean Central Bank’s decision to knock
10 zeros off in 2008, but enough to bring the depreciation of the
króna against the pound since 1936 to 99.88 per cent. This is prob-
ably worth repeating. The króna has lost 99.88 percent of its value
against the pound since 1936. For some people, this would beg the
question Why? Why would you continue to use a currency that has
consistently lost its value against the world’s major currencies (and
most minor ones like the Danish krona); a currency that can only
survive with draconian exchange controls which mean that it is no
easier for an Icelander to get his hands on foreign currencies now
than it was when Auden visited.
Well, that depends on whom you ask. Perhaps having its own
currency is part of the country’s self-image, a representation of
its independence and national culture. If you ask Iceland’s current
Prime Minister, Sigmundur Davíð Gunnlaugsson, he would tell
you, as he told investors at a London conference recently, that the
“Icelandic króna will be the currency in Iceland for the foreseeable
future. This has been a hotly debated issue in Iceland and the very
existence of the currency has been questioned by skeptics. This
government has faith in the Icelandic króna and is committed to
providing sound economic management to underpin its founda-
tions.”
Very well. So, we are being asked to believe one of two things.
One: At last Iceland has elected a government that is committed to
providing sound economic management to underpin the króna, or,
two: that there may have been other governments with such high
ideals, but that the current one is uniquely well equipped to achieve
that objective. If so, the new ISK 10,000 banknote issued by the
Icelandic Central Bank last October will not suffer the same fate as
its brothers and sisters. The ISK 500 note from 1981, for example,
would have to be reprinted as an ISK 20,100 note to have the same
purchasing power today as it had when it was launched. And that
was after two zeros had been knocked off. Not quite zimbabwe
territory, but neither is it something that happens in developed
countries.
Also, currency controls do, of course, offer opportunities for those
in the know. In order to encourage foreign investment in Icelandic
businesses, the last government decided that investors bringing for-
eign currency could buy Icelandic króna from the Central Bank
at special auctions, meaning in practice that you get króna at a 20
percent discount. The amounts this has brought as investment in
Icelandic businesses is negligible. The measure has been used in the
main by Icelanders with money abroad who have been buying local
real estate at a 20 percent discount. That’s not bad, if you can get in
on it. For the rest of us, the controls mean up to two years in prison
for keeping foreign banknotes lying around the house.
Incidentally, Auden and MacNeice were of course both Oxford
men, as were Tolkien and Turville-Petre. The relevance? Well,
Iceland’s current Prime Minister is also said to be an Oxford man,
though perhaps more in the vein of Gatsby than Auden.
When Letters from Iceland was originally published, Faber & Faber
seems to have had reservations about recommending the book—one
can imagine the editorial meeting where the marketing pitch was
agreed. Thus the flyleaf: “There may be a good many other books
about Iceland and about other expeditions, but this is the only book
by Mr. Auden and Mr. MacNeice.” In the same way you could say
about the Icelandic króna that there may be a good many other cur-
rencies but this is the only currency that is uniquely Icelandic. The
trouble is that the króna’s standing among the world’s currencies is
far from being the same as Auden’s among the world’s writers.
So what advice would Auden and MacNeice give today’s traveler?
They might suggest with good reason that you bring your gumboots
and make sure that you wear two pairs of socks. But mostly, be
careful that “you are not landed at the end of your visit with a lot
of Icelandic currency which is difficult to dispose of.” Would they
have advice for our politicians? Well, when Auden was in Iceland he
wrote that “the day of a self-contained national culture is over.” Is
our Prime Minister listening? 

Halldór Lárusson is an investor and writer living in Reykjavík.
in 1936, turf houses were what w.h. auden
saw when traveling the icelandic
countryside.
photo By helGI ARASon couRteSy of the nAtIonAl MuSeuM of
IcelAnd