Landing in Reykjavik brought back a surge of sudden memories. This is how I had traveled in the distant past, saving my money for the Icelandic flights to Europe with a few hours on the return to spend in the world’s top-rated duty-free shop. The 757 had headrest covers with patriotic sayings. Mine read “The most amazing thing about Iceland is not Vatnjaokull, the largest glacier in Europe or that Iceland uses 99% renewable energy. It is the fact that the most popular restaurant in Iceland is a hot dog stand.”
This time I am not passing through Iceland in order get somewhere else. I am going to stay for a while
Let me begin at the end and work backward. For the remainder of my days, I will be recommending that anyone within the sound of my voice consider a visit to this enchanting, quirky, open yet culturally closed, country. If it isn’t as wonderful as I say it is, call up the prime minister. You will find his number in the phone book, a phone directory, by the way, that lists the country’s 320,000 residents by their first name, since nearly everyone shares the same nine or ten last names. In fact, virtually every Icelander can trace their family roots all the way back to the land’s first settlers.
Every nation in the world aspires to be ranked at the very top of the United Nation’s Human Development Index, an index that tracks quality of life. In 2008, Iceland was at the top of the index. They were thriving. They were making lots of money, they enjoyed excellent health care, and exercise was a way of life. People were eating fish and they were a nation of fisherman
But in October of that very same year, the Icelandic financial markets crashed. The country’s three largest banks, Landsbanki, Kaupthing, and Glitnir, went under after stockpiling foreign assets worth more than $140 billion. It became clear that the losses in Iceland would bring about worldwide economic collapse.
How could such a thing happen? And how can Iceland be such a delightful summer destination given the fact that its average citizen owed approximately $310.000 as their share of lost GNP.
In his fascinating book about the crisis, “Boomerang”, Michael Lewis explains that bankers, including several who were new to the game and former fisherman, looked at what was going on at Wall Street and essentially decided, “well hey, we can do that.” The bankers in Reykjavik devised hedge funds that were based on a heady mix of foreign currency options, a concept so new and convoluted, that not everyone the room really understood them.
I couldn’t wait to check into my hotel. Hotel 101 played a pivotal but little-known role in the financial collapse because this is where Iceland’s young bankers met. The 101, named after Reykjavik’s richest postal code, is a high-design boutique hotel on a side street that connects to some of the city’s trendiest neighborhoods
My room was superbly placed given my goal. Just below my heated oak floors, was a designated conference room. The hotel only had one. I asked to see it and I was told that would not be possible.
I went downstairs anyway and confronted a black door with no inscription of any kind. I persuaded a maid to let me in and I entered a simple but elegant room with modern furnishings and no hint of what had occurred here. I sat at the head of the table.
When they began their meetings in the basement meeting room in 2003, Iceland’s banks had total assets of several billion dollars. That amount about equaled the entire country’s GNP. By the middle of 2006, that figure had grown to more than $140 billion.
As Lewis points out, this was clearly the fastest expansion of a banking system in the history of mankind. While the US stock market was doubling from 2003-2007, the Icelandic stock market increased nine-fold. Everyone in Iceland was rich. Everyone who could wanted to study the option-pricing model called “Black Scholes.” University finance programs were popping up like lava rocks.
In January of 2008, the investment firm Bear Stearns, flew a group of the world’s leading hedge fund managers to Reykjavik. They met at the Hotel 101’s bar, where drinks were to be followed by dinner. But by the time the first appetizers were offered, this dinner would clearly go down in history. The local bankers realized that almost everyone in the room was betting against them. Iceland was being “shorted.” Many of the local bankers just gave up on dinner and continued to drink.
The collapse of the Icelandic economy came swiftly and large numbers of residents lost their homes, their boats, and their dreams.
They reacted by putting many of their bankers in prison, a prison I visited on the day before I left. It is a rehabilitation facility with low fences and a pre-fab look in a small settlement not very far from the airport.
In Reykjavik, Jon Gnarr, who is both an anarchist and a professional comedian, was elected mayor. His party is called “The Best Party” and his platform included the promise of a “drug-free Parliament by 2020” and “free towels at public swimming pools.” When asked how he would solve the country’s disastrous economic crisis, he would respond “I have absolutely no idea.” This appealed to Icelanders and everyone I spoke to seems to feel that the country has righted itself.
There is a lovely store in Reykjavik that sells Icelandic-made clothing and my wife and daughter decided that they needed matching ski jackets. This to keep them warm, I suppose, on those chilly mornings in Naples, Florida, where we reside. In the store, my daughter noticed that in addition to a stairway and an elevator, there was a slide in the middle of the floor leading to the floor below. She asked the young sales person why the store had a slide and the woman thought about it and replied, “I suppose it is because it could be fun.”
That is why Iceland will thrive once again. That is part of the magic. They tried playing with the banking system and it wasn’t so much fun. But this is a country that where 80% of the population refuses to rule out the possibility that trolls and elves play an important role in their lives. Roads have been rerouted and building plans have been redesigned to avoid disturbing rocks where elves are said to dwell.
This in a country where the number of published books equals the number of residents, where internet use is the highest in the world, and where, inexplicably, residents enjoy the world’s highest consumption of Coca Cola. This is the coolest country in the world.
