Comments on: Iceland Central Bank: 18% Rate! http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 10:32:28 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: SPECTRE of Deflation http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123426 SPECTRE of Deflation Tue, 28 Oct 2008 18:18:36 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123426 Arb anyone...LOL! The vultures are circling about now. Let's see, I can borrow thru a facility at less than 3%, and buy into 18% which ain't a bad return on an arbitrage play especially if I lever up with taxpyer money...oh never mind. Remember, the storyline goes that we are lending this money out...wink...wink, but Hell I ain't turning down the arb when I would have to loan it to a broke ass Joe Six Pack when I can kick ass playing the arb and saving my own ass with the IMF backstopping me. Shitfire life is good. Arb anyone…LOL! The vultures are circling about now. Let’s see, I can borrow thru a facility at less than 3%, and buy into 18% which ain’t a bad return on an arbitrage play especially if I lever up with taxpyer money…oh never mind.

Remember, the storyline goes that we are lending this money out…wink…wink, but Hell I ain’t turning down the arb when I would have to loan it to a broke ass Joe Six Pack when I can kick ass playing the arb and saving my own ass with the IMF backstopping me. Shitfire life is good.

]]> By: Imelda Blahnik http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123425 Imelda Blahnik Tue, 28 Oct 2008 17:33:42 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123425 Isn't this exactly what helped create Iceland's problem in the first place? High interest rates to combat high inflation, which spurred currency speculation as well as domestic borrowing in foreign currencies? "The key factor in Iceland's failure has been the monetary policy pursued by its Central Bank, in particular inflation targeting, similar to the UK. This means the Central Bank targets inflation, raises interest rates if inflation is above the target, and lowers them if inflation is below target. Such a policy has a sound foundation in economic theory and is often appropriate for large countries. In the case of Iceland, it was disastrous." http://news.bbc.co.uk/2/hi/business/7658908.stm Isn’t this exactly what helped create Iceland’s problem in the first place? High interest rates to combat high inflation, which spurred currency speculation as well as domestic borrowing in foreign currencies?

“The key factor in Iceland’s failure has been the monetary policy pursued by its Central Bank, in particular inflation targeting, similar to the UK. This means the Central Bank targets inflation, raises interest rates if inflation is above the target, and lowers them if inflation is below target. Such a policy has a sound foundation in economic theory and is often appropriate for large countries.

In the case of Iceland, it was disastrous.”

http://news.bbc.co.uk/2/hi/business/7658908.stm

]]> By: Jesse W http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123424 Jesse W Tue, 28 Oct 2008 17:20:53 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123424 18% rate in this economic atmosphere? WOW! I will have to do some greater research on this! Jesse W. http://www.subprimeblogger.com 18% rate in this economic atmosphere? WOW! I will have to do some greater research on this!

Jesse W.
http://www.subprimeblogger.com

]]> By: DANM http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123423 DANM Tue, 28 Oct 2008 15:08:30 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123423 you are talking about a country with 320,000 population. this is not terribly complex to manage: a few ships, a few hundred fishing boats, 3 banks, a few hundred restaurants you are talking about a country with 320,000 population. this is not terribly complex to manage: a few ships, a few hundred fishing boats, 3 banks, a few hundred restaurants

]]> By: DANM http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123422 DANM Tue, 28 Oct 2008 15:06:59 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123422 Spectre: Never mind counterparty risk... our dear leaders are changing the rules as they change underwear, thus screwing up the game in these deals, making winners out of losers and vice versa. Spectre:

Never mind counterparty risk… our dear leaders are changing the rules as they change underwear, thus screwing up the game in these deals, making winners out of losers and vice versa.

]]> By: SPECTRE of Deflation http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123421 SPECTRE of Deflation Tue, 28 Oct 2008 14:34:52 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123421 Mark, LOL! I laugh not at your question but the absurd position we all find ourselves in. There is 1 Quadrillion in Derivatives both OTC and Private. Now the Bankers/Brokers/Thieves will tell you it's notional so no sweat because it's Zero Sum on the contract. The problem comes when you find out out the counterparty you were counting on to backstop you with the derivatives insurance you bought doesn't have jack shit to pay you with. Then the little mouse traps start going off. It Ain't Contained!!! Mark, LOL! I laugh not at your question but the absurd position we all find ourselves in. There is 1 Quadrillion in Derivatives both OTC and Private. Now the Bankers/Brokers/Thieves will tell you it’s notional so no sweat because it’s Zero Sum on the contract. The problem comes when you find out out the counterparty you were counting on to backstop you with the derivatives insurance you bought doesn’t have jack shit to pay you with. Then the little mouse traps start going off.

It Ain’t Contained!!!

]]> By: baychev http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123420 baychev Tue, 28 Oct 2008 13:24:05 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123420 what enitire economy? you are talking about a country with 320,000 population. this is not terribly complex to manage: a few ships, a few hundred fishing boats, 3 banks, a few hundred restaurants and eateries, etc. what enitire economy? you are talking about a country with 320,000 population. this is not terribly complex to manage: a few ships, a few hundred fishing boats, 3 banks, a few hundred restaurants and eateries, etc.

]]> By: Mark http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123419 Mark Tue, 28 Oct 2008 13:01:17 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123419 cds meltdown. Can his happen here? cds meltdown. Can his happen here?

]]> By: SPECTRE of Deflation http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123418 SPECTRE of Deflation Tue, 28 Oct 2008 13:00:33 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123418 We lend the thieves $700 Billion of our money so that they can loan it back to us at interest. I believe this is an example of what Sir Stamp was trying to tell us: "Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the POWER to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits."--<b>SIR JOSIAH STAMP</b>, (President of the Bank of England in the 1920's, the second richest man in Britain) We lend the thieves $700 Billion of our money so that they can loan it back to us at interest. I believe this is an example of what Sir Stamp was trying to tell us:

“Banking was conceived in iniquity, and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the POWER to create deposits, and with the flick of the pen, they will create enough deposits, to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers, and pay the cost of your own slavery, let them continue to create deposits.”–SIR JOSIAH STAMP, (President of the Bank of England in the 1920’s, the second richest man in Britain)

]]> By: DANM http://www.ritholtz.com/blog/2008/10/iceland-central-bank-18-rate/comment-page-1/#comment-123417 DANM Tue, 28 Oct 2008 12:32:48 +0000 http://ritholtz.vs3.wilder.ca/blog/2008/10/iceland-central-bank-18-rate/#comment-123417 Yeah well, when all bankers become fishermen, there will no more fish left. Why do I get the feeling that all the beautiful people will be leaving soon? Yeah well, when all bankers become fishermen, there will no more fish left.

Why do I get the feeling that all the beautiful people will be leaving soon?

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