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Sunday, September 2, 2012

‘Boomerang: The meltdown tour’ by Michael Lewis

Icelanders

"Icelanders – or at any rate Icelandic men – had their own explanations for why, when they leapt into global finance, they broke world records: the natural superiority of Icelanders. Because they were small and isolated, it had taken 1,100 years for them – and the world – to understand and exploit their natural gifts, but now that the world was flat and money flowed freely, unfair disadvantages had vanished. Iceland's president, Ólafur Ragnar Grimsson, gave speeches abroad in which he explained why Icelanders were banking prodigies. 'Our heritage and training, our culture and home market, have provided a valuable advantage,' he said, then went on to list nine of these advantages, ending with how unthreatening to others Icelanders are. ('Some people even see us as fascinating eccentrics who can do no harm.') There were many, many expressions of this same sentiment, most of them in Icelandic. 'There were research projects at the university to explain why the Icelandic business model was superior,' says Gylfi Zoega, chairman of the economics department. 'It was all about our informal channels of communication and ability to make quick decisions and so forth.''

"'We were always told that the Icelandic businessmen were so clever,' says university finance professor and former banker Vilhjálmur Bjarnason. 'They were very quick. And when they bought something they did it very quickly. Why was that? That is usually because the seller is very satisfied with the price.''

"You didn't need to be Icelandic to join the cult of the Icelandic banker. German banks put $21 billion into Icelandic banks. The Netherlands gave them $305 million, and Sweden kicked in $400 million. UK investors, lured by the eye-popping 14 per cent annual returns, forked over $30 billion - $28 billion from companies and individuals and the rest from pension funds, hospitals, universities, and other public institutions. Oxford University alone lost $50 million.'

"Maybe because there are so few Icelanders in the world, we know next to nothing about them. We assume they are more or less Scandinavian – a gentle people who just want everyone to have the same amount of everything. They are not. They have a feral streak in them, like a horse that's just pretending to be broken."

(pp. 22-3, 'Boomerang: The meltdown tour' by Michael Lewis - Landmark)

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