Sheep bubble

by Eleanor Arnason • 10/17/08 • Iceland is the canary in the economic coal mine.

There is an article on Iceland in today’s Guardian. The Icelanders interviewed are still being philosophic, saying “We’ve been poor before” and “We know how to work hard” and “We don’t have to worry about eating; we have plenty of fish.”

My favorite quote went more or less like this:

“We’ve been through hard times before, when the sheep bubble collapsed…”

I suppose I need to Google “sheep bubble” and get the details… I think I’ve found it.

The sheep bubble was a boom in the price of sheep during World War One, which ended abruptly and left many farmers in debt. The Icelandic novelist Haldor Laxness wrote about it in his great novel Independent People.

I found this quote from Laxness on the blog Debtonation, run by the economist Ann Pettifor. I don’t know her work, but she sounds very interesting.

The hero, if you can call him that, of the novel is Bjartur, a farmer who struggles to survive and be independent, as he understands the word.

People take more upon themselves than they can manage if they aim higher. True, it had been quite usual in the old days for the people to owe the merchant money and to be refused credit when the debt had grown too big. It had likewise been nothing uncommon for people thus denied sustenance to die of starvation, but such a fate, surely, was infinitely preferable to being ensnared by the banks, as people are nowadays, for at least they had lived like independent men, at least they had died of hunger like free people.

The mistake lies in assuming that the helping hand proferred by the banks is as reliable as it is seductive, when in actual fact the banks may be relied upon only by those few exceptionally great men who can afford to owe anything from one to five millions. So about the same time as Bjartur sold his better cow to raise money for wages and paid a thousand crowns off the loan and six hundred as interest by making inroads on his stock of sheep, the Fell King sold his farm to a speculator for the amount of the mortgages with which it was encumbered and fled to live in a hovel in the town, yes, and thought himself lucky to escape.

The National Bank had passed into Ingolfur Arnarson’s control and had become a Statebank on the basis of a huge government loan from England; remissions of and concessions on loans were out of the question now, unless it was a matter of millions, and the farmers’ produce had fallen disastrously in price.

Yes, the bottom fell out of everything, the autumn that Bjartur’s house was one year old.

Earlier in October 2008

The economic news from Iceland is really, really bad; and I am more distressed by it than what’s happening here. The US is a very big, very rich country with a lot of natural resources and a huge internal market. If we decide to fix our problems, we can. For that matter, we probably have the resources to fix the world’s problems, though it isn’t likely we will.

Iceland is a lot more vulnerable.

The Icelanders probably should have stuck to cod and sheep and geothermal power. I was out in an Icelandic fishing boat once. Those cod are a very reliable looking fish.

Finance is a mug’s game.