Time to put money Back into ICELAND?

JayTee99_2

Seems that the rate increase was a requirement by the IMF

http://www.sedlabanki.is/?PageID=287&NewsID=1938

Last week the Icelandic Government and a mission from the International Monetary Fund concluded an agreement. One of the points in the agreement was that when it will be presented to the Executive Board of the Fund for its approval, which should happen in the next few days, the Central Bank was to have raised the policy rate to 18%. This has now been done. This decision has been taken with reference to the fact that, with the collapse of three banks and the harsh external measures that followed, Iceland's foreign exchange market became paralysed. Although the situation has eased somewhat, some restrictions continue to be inevitable.

(my bold)

peawack

When greed becomes an obsession, rational thinking goes out of the window.

Ivan_Konstantinov

Moon_Boi wrote: »

Iceland now paying 18% interest, i don't think you can beat that??:money:

http://www.bloomberg.com/apps/news?pid=20601068&sid=ay_YbdypX2T0&refer=home

hello can you tell me the name of the bank for 18percent
thanks

andy_l_2

Me? Not while I have a hole in my bum will I ever trust Iceland again !

climbgirl

Ivan_Konstantinov wrote: »

hello can you tell me the name of the bank for 18percent
thanks

It's not a bank offering that rate, it's the base rate for Iceland as a country. Banks won't neccessarily follow suit, it's a move to try and stop the freefall of the Icelandic currency. The IMF required the rate rise as a condition on their bailout loan.

amcluesent

18% plus the chance the Krona will appreciate against GBP has it becomes crystal clear the disastrous consequences of 10 years of bungling pension thief Clown at the Treasury.

ManAtHome

Lol, yes, Troosers has been trying to get the Chinese and Middle East to bung more dosh at the IMF "to shore up countries struggling due to the financial crisis" (wonder if he had anyone in mind)..? http://www.independent.co.uk/news/uk/politics/brown-demands-more-imf-resources-to-halt-contagion-976083.html

dag_2

This strikes me as a bit odd. Unless I'm greatly mistaken, it was Iceland's high interest rate that encouraged the currency speculators to push the Icelandic kroner into the bubble that just went pop, taking your Icesave savings with it, in the first place. Surely if they ramp up the interest rate, then the same thing is just going to happen all over again?

I think the previously fashionable idea that you can strengthen a currency by upping the central bank's interest rate has now been thoroughly discredited. Everyone's going "woohoo, what a high interest rate", which proves the point; there's a limit to how far you can put it up without encouraging the currency speculators that push it into a bubble.

Then again, maybe once bitten twice shy; it popped once, and perhaps the thought that it might pop again might put the speculators off. But on the other hand, the longer it runs without going pop, the more of us will think that maybe the October 2008 "pop" really was a one-off after all .... but then, that's exactly the problem. One or two speculators dealing with kiddie pocket money is no big deal. But when you get millions of them, all ploughing millions of pounds / dollars / euro / (insert other currency here) into Icelandic kroner at the same time, and then all trying to convert back again into their home currencies again at the same time later on - oops! It's when they all try to convert back that it goes "pop". And I can't see how you can stop that from happening.

If anyone thinks I've overlooked some fundamental economic reality here, then please point it out to me, thanks. To be honest, though, I think that Iceland could do worse than to write off the kroner, and start circulating a different currency instead, such as the US dollar.

peawack

amcluesent wrote: »

18% plus the chance the Krona will appreciate against GBP has it becomes crystal clear the disastrous consequences of 10 years of bungling pension thief Clown at the Treasury.

How much are you putting in then ?

SkipClick

peawack wrote: »

How much are you putting in then ?

ONE BIG ZERO WILL FROZE;)