Iceland may go bankrupt

[Jeemie]

http://news.yahoo.com/s/ap/20081007/ap_ ... meltdown_1

They expanded vigorously into the global economy and have an outsized banking sector as a result.

They've nationalized their banks, Britain has done a partial nationalization of their banks, and the world markets have tanked yet again.

I believe this is it, folks- the final meltdown of the financial system has definitely begun.

[Bob Juch]

http://news.yahoo.com/s/ap/20081007/ap_ ... meltdown_1

They expanded vigorously into the global economy and have an outsized banking sector as a result.

They've nationalized their banks, Britain has done a partial nationalization of their banks, and the world markets have tanked yet again.

I believe this is it, folks- the final meltdown of the financial system has definitely begun.

I have this feeling we're just rearranging the deck chairs on the Titanic.

[Weyoun]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

[TheConfessor]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Why would a canary, a bird that weighs only a few ounces, dying indicate anything about the air quality of the larger coal mine?

[Jeemie]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Because of WHY they are going bankrupt.

[BackInTex]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Because of WHY they are going bankrupt.

And WHY are they going bankrupt?

[Weyoun]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Why would a canary, a bird that weighs only a few ounces, dying indicate anything about the air quality of the larger coal mine?

So, if one business goes bankrupt, does that mean many more will go bankrupt?

[TheConfessor]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Why would a canary, a bird that weighs only a few ounces, dying indicate anything about the air quality of the larger coal mine?

So, if one business goes bankrupt, does that mean many more will go bankrupt?

Yes, if history is any indication. Such things generally run in cycles.

[Jeemie]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Because of WHY they are going bankrupt.

And WHY are they going bankrupt?

Because they are heavily invested in the world economy, and have an outsized baking industry that is heavily exposed to the bad MBSs.

[Jeemie]

Why would Iceland, a country of 300,000, going bankrupt indicate anything about the larger global economy?

Why would a canary, a bird that weighs only a few ounces, dying indicate anything about the air quality of the larger coal mine?

So, if one business goes bankrupt, does that mean many more will go bankrupt?

When they are all exposed to similar risks, yes.

This is what the main problem with MBSs and CDOs.

The banking industry treated them like insurance policies,

Only they weren't- because individual mortgages aren't like individual drivers.

If I get in a car wreck, the insurance industry can deal with it because just because I got into a car wreck, it does not mean that the chances of a large number of drivers' chances of getting into a wreck goes up.

But in this case, when one person got into trouble with a subprime mortgage, the odds that a lot of other subprime mortgage-holders would get into trouble DID, in fact, increase.

[silverscreenselect]

The banking industry treated them like insurance policies,

Only they weren't- because individual mortgages aren't like individual drivers.

If my house burns down, there is a considerably greater than normal chance of your house burning down as well if it's close to mine. If I suffer hurricane damage, there's a good chance you might suffer hurricane damage if you live near me.

That's why insurance companies refuse to insure too many homeowners in a concentrated geographic area.

The banks didn't follow that advice and bought up far too much similar paper.

However, this bad paper is not worthless. It's not worth what it was valued at but it has considerable value because it is backed by real estate having considerable value. Given time, the financial markets can adjust and set a proper value for the paper which is likely to be much higher than what it would fetch in a fire sale. And renegotiating as many of these mortgages as possible on a realistic basis is far more preferable than mass foreclosures.

[tubadave]

Because they are heavily invested in the world economy, and have an outsized baking industry that is heavily exposed to the bad MBSs.

So they got themselves in trouble by making "bread" that they didn't really have enough "dough" for?


(OK, sorry, even I have to groan a little bit at that one.)