Saturday, 21 August 2010

Were Iceland’s banks run by elves? And have we upset them?

Jeremy Clarke in his ‘Low Life’ Spectator column writes about elves. More specifically Icelandic elves. This is what he was told:

“Even today, she said, when a road is built in Iceland the contractors take great care not to route it through an elves’ village. There was a celebrated case not so long ago, in fact, where road builders were unable to start their heavy plant one morning. The machines just refused to start. The contractors came out to the site to investigate and their first suspicions were quickly confirmed when they realised the next day’s levelling work would have flattened some elves’ dwelling places. The road was accordingly rerouted at considerable expense.”

The other thing we know about Iceland is that they suddenly – almost overnight and without anyone actually noticing – became a banking powerhouse.

“An entire nation without immediate experience or even distant memory of high finance had gazed upon the example of Wall Street and said, “We can do that.” For a brief moment it appeared that they could. In 2003, Iceland’s three biggest banks had assets of only a few billion dollars, about 100 percent of its gross domestic product. Over the next three and a half years they grew to over $140 billion and were so much greater than Iceland’s G.D.P. that it made no sense to calculate the percentage of it they accounted for. It was, as one economist put it to me, “the most rapid expansion of a banking system in the history of mankind.”

And this powerhouse, equally dramatically, collapsed leaving debt, misery and a load of very grumpy Icelanders. Some feel – or appear to suggest – that the problem wasn’t the worldwide credit crunch, sovereign debt, banker corruption or indeed any mundane economic reasons. The problem was that the elves (or possibly gnomes and trolls working for the elves) called in their debts. As a Vanity Fair article (quoted above pointed out):

Alcoa, the biggest aluminium company in the country, encountered two problems peculiar to Iceland when, in 2004, it set about erecting its giant smelting plant. The first was the so-called "hidden people" -- or, to put it more plainly, elves -- in whom some large number of Icelanders, steeped long and thoroughly in their rich folkloric culture, sincerely believe. Before Alcoa could build its smelter it had to defer to a government expert to scour the enclosed plant site and certify that no elves were on or under it. It was a delicate corporate situation, an Alcoa spokesman told me, because they had to pay hard cash to declare the site elf-free but, as he put it, "we couldn’t as a company be in a position of acknowledging the existence of hidden people."

The second problem is that all Icelandic males consider themselves heroes from the sagas. But the main problem seems to be that the investment bankers – behaving like heroes (that is rashly and without though of course) – didn’t pay enough attention to the elves. As is suggested here:

Possibly the Icelandic banks should have made sure there were no hidden people lurking in their balance sheets, waiting to take revenge on anyone who disturbed them.


Afterthought: I understand elves are rubbish at football too. Which explains a lot!



Frances Coppola said...

Do you know the story of the Elves and the Shoemaker? Uncannily accurate (except for the last sentence):

Nicholas Shaxson said...

re football: but they are good at celebrating their goals when they do score