Michael Lewis writing for Vanity Fair: “Wall Street on the Tundra”
Iceland’s de facto bankruptcy—its currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insurance—resulted from a stunning collective madness.
What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power?
Michael Lewis explains:
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.
The fundamental transformation came in 2003:
Iceland’s three biggest banks had assets of only a few billion dollars, about 100 percent of its gross domestic product. Over the next three and a half years they grew to over $140 billion and were so much greater than Iceland’s G.D.P. that it made no sense to calculate the percentage of it they accounted for.
Riot in Reykjavik - Jan 20, 2009
I understood the basics of the story of Iceland’s collapse from reading the news reports of riots as the global financial system melted down, but I learned of this amazing Vanity Fair article when I listened to CBC’s “The Current” podcast on the way home from work last week. The March 27th show dug deeper on a point raised in the ”Wall Street on the Tundra“ piece. Many of these “well-educated, historically rational human beings” we’re susceptible to believing myths even more ridiculous than the one that there was little risk inherent in leveraging their country’s entire 2003 economy 47 times by 2007…
The majority of Iceland will not deny the existence of elves:
According to Lewis, when the American aluminum giant ALCOA decided that it wanted to build a smelter in Iceland, the company had to first verify that it wouldn’t be trespassing on land occupied by “hidden people” or as most of you would know them… elves.
Now, as far as we know, most ALCOA officials don’t believe in elves. But ALCOA does acknowledge that it paid hard cash to make sure the future site of its smelter was elf-free.
In the CBC interview, we learn that there are consultants that hire themselves out to companies to ensure potential worksites are elf-free and that sites have even been moved because of their interference with the “hidden people.”
Slate.com elaborates:
According to a poll conducted in 2007, 54 percent of Icelanders don’t deny the existence of elves and 8 percent believe in them outright, although only 3 percent claim to have encountered one personally.
All this begs the question: is it really a surprising coincidence that Iceland, whose former Prime Minister David Oddsson – “the architect of Iceland’s rise and fall” – was “under the spell of Milton Friedman,” AND that it also has a burgeoning elf detection industry?
Great myths require fertile soil.
