Is Iceland the victim of a financial conspiracy?

Such things really do happen. During the 1997-1998 financial crisis there was, almost certainly, a financial conspiracy against Hong Kong. According to the Hong Kong Monetary Authority, several major hedge funds engaged in a “double play”, shorting both the city-state’s stock market and its currency. The alleged plan was to put the HKMA in a double bind: it would be forced either to raise interest rates to defend the Hong Kong dollar — driving stocks down — or to devalue the currency. Either way the hedge funds thought they’d make a killing. They were, however, caught in a bear trap when the HKMA did the unexpected and bought up a large fraction of the HK stock market.

There was also, according to Australian officials I talked to at the time, a deliberate effort to drive down the Aussie dollar.

Now, Iceland is making similar allegations:

The cost to protect the bonds of Iceland’s three biggest lenders from default rose after central bank Governor David Oddsson said “unscrupulous dealers'’ are trying to break the country’s financial system.

Oddsson called for an international investigation into attempts to drive Iceland’s economy “to its knees,'’ in a speech on March 28. The central bank was forced to raise its benchmark rate to a record 15 percent last week to defend the krona after a 30 percent slump against the euro this year.

Attacks on the country’s Reykjavik-based banks “give off an unpleasant odor of unscrupulous dealers who have decided to make a last stab at breaking down the Icelandic financial system,'’ Oddsson said at the central bank’s annual meeting in Reykjavik. “They will not get away with it.'’

One interesting point: it appears that the Icelandic authorities particularly suspect Bear Stearns.

I’ll be keeping an eye on this.

 

Dęmi um svar į bloggi:


9:05 pm

Greg said:

“If they are long credit default swaps, then all they need is to spread rumor of a default to make their profit”

Well that is exactly what they have done. The Sunday Times published news yesterday saying that people in England were closing their account they had in the Icelandic banks in England. It turn out to be fabrication. News have been circulating for the past weeks that the banks would not been able to refinance their loans, when it turns out that none of the banks need refinancing until at earliest late next year. The CDS for the Icelandic government jumped 400 points last Friday despite the fact the government has no foreign loans. Everything points to the fact that what mr. Krugman is saying is actually happening and it is scary that Bear Stearns that was recently saved by the US federal Bank

— Posted by marino

 

Žessi grein er skrifuš ķ mars į žessu įri. Žetta minnir nś óžęgilega į žaš sem viš höfum horft uppį udanfariš. Er žaš tilviljun?

http://krugman.blogs.nytimes.com/2008/03/31/the-north-atlantic-conspiracy/