Global Financial Crisis (Was: Subprime Meltdown)

[Fusion_power]

I liked this commentary re the housing bubble. Note that Obama has some horrible 'tulip bubble' type ideas for 'helping' underwater mortgagees.

http://www.cbsnews.com/stories/2008/...n4632742.shtml

DarJones

Now these same Washington soothsayers are predicting that today's economic troubles can be ameliorated by propping up real estate prices. Reps. Frank and Nancy Pelosi said last week that it's "essential" to partially guarantee 1.5 million mortgages, and President-elect Barack Obama also wants "direct, immediate assistance for homeowners." (See related CBS News video.)

Meanwhile, the Bush administration is horrified that Americans are saving money and banks are returning to the tighter lending rules they used a few years ago. It announced this week two different programs totaling $800 billion that could, in part, goose house prices by lowering mortgage rates.

On Capitol Hill, house builders have been swarming like houseflies. Toll Brothers wants Congress to "stimulate demand by reducing mortgage rates and fees" and creating more tax incentives to buy homes. The Wall Street Journal reported on Monday that builders are "ramping up" lobbying efforts.

In reality, more government intervention will do more harm than good. The sooner prices are allowed to naturally fall to normal, post-bubble levels, and the sooner that houses become affordable, the sooner the economy can heal itself and start growing instead of contracting.

By way of analogy, imagine a reprise of the Dutch tulip mania of 1637. Say the price of tulip bulbs has grown handsomely in the last few years, and impressive fortunes were made by early speculators.

Bidding wars erupt, with the winners hoping to resell them the bulbs at a handsome profit months or years later. Cable TV hosts proclaim that a golden age of prosperity has dawned. Prized bulbs change hands for $1 million each, and skeptics are reviled as doomsayers.

Eventually this boom leads to a bust, as new buyers become scarce, and the price of tulip bulbs suffers a dizzying fall down to $10 each. Speculators complain to Congress. Politicians pledge to use tax dollars to purchase bulbs for $1,000 or $10,000, invoking phrases like "stability" and "liquidity crisis," or offering taxpayer-backed loan guarantees to speculators.

This would sound silly for tulips, but it's close to what's happening for houses. All this will do is slow -- and not arrest -- the process of prices falling. Not even the president of the United States can veto the laws of supply and demand.

It's difficult to convince someone to buy a tulip bulb (or house) today if he thinks the price will be a lot lower in a year. Worse, government spending diverts funds away from productive purposes, including investment, education, and infrastructure.

[ewmayer]

European Retailers `Going to the Wall' as Recession Bites: Chart of Day: Store failures may accelerate after Woolworths Group Plc and MFI Retail Ltd. went into administration, reeling from the worst slump in European retail sales in at least five years.


Panic In China Over Jobs, Economy, Cotton: China’s biggest interest-rate cut in 11 years highlights government concerns that the country risks spiraling unemployment, social unrest and the deepest economic slowdown in almost two decades.


Porsche's Options Strategy Poses Debt Risk in Case Volkswagen Shares Drop: Porsche SE, which earned six times more through Volkswagen AG derivatives than by selling cars this year, may run into trouble over the options that helped it build its stake in Europe’s largest carmaker, analysts said.

Porsche’s tactic is a “daunting mix of risk and reward” that may force it to buy Volkswagen shares if they fall toward 200 euros, leaving the maker of the 911 sports car highly indebted, Citigroup Inc. said in a report dated yesterday. Separately, Sanford C. Bernstein Ltd. said Porsche faces “material” risk should Volkswagen shares near 242 euros.

Analysts have speculated that Porsche has financed the acquisition of calls by selling puts, which would force the carmaker to buy VW shares if the contracts are exercised. Porsche said this week that its Volkswagen options bets produced a gain of 6.83 billion euros ($8.8 billion) in fiscal 2008. The company made 1 billion euros from selling vehicles.

Are Porsche’s management “the smartest guys in the room” or “in trouble?” wrote Max Warburton, an analyst at Bernstein in London, in a note today. “In our view, Porsche is still in control, but possibly at considerable risk until the put options apparent in its balance sheet expire by July 2009.”

Sarkozy Voodoo Dolls Must Be Sold With Warning Label, Appeals Court Rules: French President Nicolas Sarkozy voodoo dolls can still be sold by a publisher as long as they come with a warning that sticking pins in the toy is an affront to his dignity, a Paris court ruled today.

[Xyzzy]

A Japanese car company and an American car company decided to have a canoe race. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.

Feeling a deeper study was in order, they hired a consulting company and paid them a large amount of money for a second opinion.

The consulting company advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents, and 1 assistant superintendent steering manager.

They also implemented a new system that would give the 1 person rowing the boat a greater incentive to work harder. There was discussion of getting new paddles, canoes, and other equipment, extra vacation days to train and bonuses.

The next year the Japanese won by two miles.

Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles and canceled all capital investments for new equipment. The money saved was distributed to the senior executives as bonuses.

[cheesehead]

Ernst,

What's your general opinion of Joe Nocera, whose blog for The New York Times is "Executive Suite" (http://executivesuite.blogs.nytimes.com/) ?

He's recently published two e-mail messages sent to him by an executive who works for "one of the country's biggest banks".

The first is at http://executivesuite.blogs.nytimes....er-speaks-out/ and champions local community banks over big banks. It (the e-mail sent to Nocera) begins:

I’m a 35-year veteran in the banking industry. And I’ve spent the better part of my career working for the big banks as a small business banker and credit underwriter. Small business lending, in industry terms, is defined as a business that has less than $20 million in revenue and that borrows less than $5 million. I’ve been a lender for most of those years and I’ve been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. ...

The second e-mail is at http://executivesuite.blogs.nytimes....rd-debacle/?em and is about what Nocera terms "the coming credit card debacle":

Today, we are bailing out the banks because of their greedy and deceptive lending practices in the mortgage industry. But this is just the tip of the iceberg. More is coming, I’m sorry to say. Layoffs are being announced nationwide in the tens of thousands. As people begin to lose their jobs, they will not be able to pay their credit card bills either. And the banks will be back for more handouts.

. . .

As a banker, let me describe what we do wrong when we accept and review an application for a credit card. ...

. . .

[ewmayer]

Originally Posted by cheesehead

Ernst,

What's your general opinion of Joe Nocera, whose blog for The New York Times is "Executive Suite" (http://executivesuite.blogs.nytimes.com/) ?

Not a regular reader - there's only so many econo-blogs I have time to regularly peruse - but he`s spot on with his take on the coming tsunami of credit-card defaults. Please keep the interesting bits from his blog coming.

----------------

Switzerland Feels Iceland's Pain With Banks Teetering on Vanishing Credit: An isolated European country with an economy geared toward finance and winter sports is no longer a monetary bastion as credit evaporates around the globe. Banks teeter, the once-impregnable currency depreciates and a proudly independent people question whether a centuries-old go-it-alone strategy can survive.


Manufacturing index at 26-year low: Purchasing managers survey shows overall economy is in contraction for second straight month.

"Manufacturing is in freefall," said Ian Shepherdson, chief U.S. economist at research firm High Frequency Economics, in a note to clients. "This survey promises continued recession."

The part of the index that measures prices paid by manufacturers for raw materials plummeted 11.2 points in November to 25.5. It was the lowest reading since May 1949, nearly 60 years, when it registered 20.1.

While lower prices can provide some relief for struggling businesses and consumers, the dramatic decline in prices over the last few months has many economists worried about the prospect of deflation.

Deflation occurs when prices fall as a result of weak consumer demand. That can force businesses to cut costs by eliminating jobs, which undermines consumers' purchasing power and further weakens demand.

My Comment: Note that perhaps the truest measure of inflation/deflation - consumers` aggregate purchasing power [which results from both real wealth and access to credit] is not measured in any direct way by any of the government statistics. One of the key results of the easy credit of the last decade - the housing-price bubble - was highly inflationary, but appeared nowhere in government inflation figures, just as the ensuing collapse in housing prices and accompanying credit tightening and plunge in consumer purchasing power are not appearing in the statistics except via second-order effects such as dropping demand for consumer discretionaries. So of course most economists are "surprised" by signs of deflation, because they, like the folks at the Fed, have been looking at "the wrong part of the elephant".


Holiday shopping off to surprisingly strong start: [i]Reports show Black Friday gains, but caution that key retail season may still end up weak.[/url]

NEW YORK (CNNMoney.com) -- Stores and online merchants were busier this weekend than they were a year ago, according to figures out Sunday, but signs persist that holiday shopping will suffer in the weakest economic climate in decades.

The National Retail Federation (NRF), an industry trade group, said shoppers spent $41 billion in the 4-day Thanksgiving weekend. The average shopper spent $372.57, up 7.2% from the $347.55 spent last year.

"Pent-up demand on electronics and clothing, plus unparalleled bargains on this season's hottest items helped drive shopping all weekend," said NRF President and CEO Tracy Mullin, in a statement. "Holiday sales are not expected to continue at this brisk pace, but it is encouraging that Americans seem excited to go shopping again."

To underscore its caution, the NRF reiterated its forecast that 2008 holiday spending will rise just 2.2%, to $470.4 billion, the smallest gain in six years.

The weak economy was also reflected in the fact that more than half of shoppers, 54.7%, went to discount stores such as Wal-Mart, according to the NRF. Department stores were visited by 43% of shoppers, up from last year, while 36% visited specialty stores and 34% shopped online.

Another indication of the economy's impact: the NRF said that of the 73.6 million people who shopped in stores and online Friday, 23.3% were at it before 5 a.m., when many merchants offered huge discounts on selected items. More than half of shoppers, 57.6%, were in stores and online by 9 a.m.

My Comment: So, overal sales may have been up, but I expect profits were down hugely, since so many people were "only buying the bananas", i.e. the loss-leader mega-discount items. Here in the U.S., rumor has it that the best time to buy that huge plasma or LCD flat-screen TV you've been dreaming of will be after February's Super Bowl [the U.S. Football national championship, in terms our overseas readers will better understand].

[S485122]

Originally Posted by cheesehead

The second e-mail is at http://executivesuite.blogs.nytimes....rd-debacle/?em and is about what Nocera terms "the coming credit card debacle":

In a lot of european countries, a bank that gives a loan to someone whithout properly verifying the repayment capacity, or gives a loan to someone that cannot repay (because to much in debt already, not sufficient income, ...) can see the loan forfeited (the customer does not ow the bank anything anymore.) Those laws have been passed to force banks to check before lending and to cut the business of credit sharks who offer to centralise all debts (and that in reality, first take their commission and then try to reschedule the loans.

Jacob

[Fusion_power]

The long and short of it re the credit card crisis is that lenders will dramatically reduce credit lines and/or cancel cards. This will affect people like me with a $20,000 credit line on a credit card even though I routinely use my card for business purchases and pay it down or pay it off every month. My credit rating is very high so in the past I have not had any issues borrowing. The problem gets down to the fact that I use the credit card to purchase supplies for my business and without the proper amount of credit, I won't be able to buy supplies using the card. That means I now have to operate my business on a cash basis as much as possible. I have that flexibility as a small busines that is cash flow positive, but there are tons of other businesses that aren't.

Lets translate that into trickle down economics. It is finally going to trickle over virtually every person who has a mortgage or a credit card. That means virtually every family in the U.S. Get ready folks, whatever you felt up to this point was minor.

DarJones

[ewmayer]

U.S. Recession Began Last December, Making Contraction Longest Since 1982: The U.S. economy entered a recession a year ago this month, the panel that dates American business cycles said today, making this contraction already the longest since 1982.

My Comment: The surprise is not that the U.S. went into recession a full year ago, it's that it only took the official gubbermint number-jugglers a mere year to realize what was quite obvious from anyone following the deflation of the housing bubble, which was well underway by that point.


Bernanke Says Fed May Purchase Treasuries, Citing Reduced Rate-Cut Options: Federal Reserve Chairman Ben S. Bernanke said he has “obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy.

Bernanke’s comments pushed Treasury yields to record lows. Bernanke has created more than $2 trillion of emergency lending programs in the past year, using the Fed’s balance sheet and money-creation authority to cushion the economy from the worst financial crisis in seven decades. The central bank may lower its benchmark interest rate to zero, economists said.

My Comment: This is just simply the snake eating its own tail at this point - the Fed's balance sheet consists mostly of U.S. treasuries, and since the balance sheet has been shredded by all the emergency lending programs, the Fed must either create new money out of thin air by its printing authority, or borrow money from the Treasury, typically by way of ... borrowed Treasuries. Ain`t it cool? Whichever way you slice it, it ends up at the "magic money printing press".


Schwarzenegger declares emergency: The state's governor calls lawmakers into a special session to address the state's $11.2 billion deficit.

SACRAMENTO, Calif. (AP) -- Gov. Arnold Schwarzenegger declared a fiscal emergency Monday and called lawmakers into a special session to address California's $11.2 billion deficit.

The state's revenue gap is expected to hit $28 billion over the next 19 months without bold action. The emergency declaration authorizes the governor and lawmakers to change the existing budget within the next 45 days.

Without quick action, the state is likely to run out of cash in February.

Schwarzenegger and Democrats have proposed a combination of tax hikes and spending cuts, but Republican lawmakers are steadfast in their refusal to raise taxes.

Lawmakers failed to reach a compromise during the special session Schwarzenegger declared last month, pushing the problem to a new Legislature that was being sworn in Monday.

The crisis worsens each week, so the Republican governor did not want to waste any time in declaring a special session, said his spokesman, Aaron McLear.

"It's important that we start on Day One so the new Legislature can start immediately to solve our fiscal crisis," he said.

There appeared to be little reason to believe that Republican lawmakers would budge on their opposition to tax increase.

"If anything, I think our resolve (against raising taxes) is deeper than it has ever been because of the economic realities," Senate Minority Leader Dave Cogdill said Monday.

Democrats don't have the two-thirds majority in either the Assembly or Senate that is required to pass tax increases or a state budget.

My Comment: This is shaping up to be interesting game of budgetary "chicken".


Image of the Day: Courtesy of ozmad.net - very clever play on Bernanke's "Helicopter Ben" nickname:

[cheesehead]

Originally Posted by ewmayer

U.S. Recession Began Last December, Making Contraction Longest Since 1982: The U.S. economy entered a recession a year ago this month, the panel that dates American business cycles said today, making this contraction already the longest since 1982.

My Comment: The surprise is not that the U.S. went into recession a full year ago, it's that it only took the official gubbermint number-jugglers a mere year to realize what was quite obvious from anyone following the deflation of the housing bubble, which was well underway by that point.

Your statement that "it only took the official gubbermint number-jugglers a mere year to realize what was quite obvious from anyone following the deflation of the housing bubble", is unjustified on two counts.

First, "the panel that dates American business cycles" is _not_ a government agency. As the article explains, "The declaration was made by a committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts."

Secondly, the committee _has_ to wait for several months to a year after a business peak or trough occurs in order to be able to determine that it's not just a temporary fluctuation that will reverse again in a month or two. Otherwise, it could be in the same position as all the folks who've hastily declared that we reached a global Hubbert's Peak recently, just because there was a drop in global oil production for a while. As I've been saying, we won't be able to determine when Hubbert's Peak occurs until after it has happened and we see evidence that the decline isn't temporary. The same principle applies to defining business cycle peaks and troughs.

[cheesehead]

Originally Posted by ewmayer

Schwarzenegger declares emergency: The state's governor calls lawmakers into a special session to address the state's $11.2 billion deficit.

My Comment: This is shaping up to be interesting game of budgetary "chicken".

... and it's another illustration of what the three-decades-ago change in conservative fiscal strategy that I've been pointing out means:

Certain conservative strategists (not all of them, but the ones who crafted or sympathize with the think-tank changes back in the 1970s that I've described elsewhere) are quite willing to send this nation, or the entire world if necessary, into a financial tailspin in order to accomplish what they cannot achieve at the ballot box: destroying the "liberal" aspects of government.

This is real hard-ball, folks.

Too bad it's short-sighted hardball. The conservative refusal to acknowledge partial legitimacy of the other end of the political spectrum leads them to stage ever-more-arrogant power plays. (Notice any resemblance to certain recent activities in Mumbai?) But their refusal to acknowledge some fundamental truths about human nature means that these escalating attempts cannot achieve what they want in the long run, because basic human nature, which includes the entire liberal-conservative spectrum despite conservative (or liberal) denial of that, will not allow it. (Ditto for Islamic extremists.)

Now, I'm not claiming that the Republican refusals to roll back part of the tax cuts they achieved in the past are on the same level as terrorist bombing and shootings. What I'm saying is that there are parallels in the reasoning behind them. I don't expect that those parallels will be obvious to conservatives/Republicans (as they would not be in a mirror-image case, either); I'm trying to develop ways of explaining what I see.

OTOH ... sufficiently severe financial catastrophes can kill as many innocent-bystander-type people as, or more than, terrorist shootings and bombings, although the toll won't be so easily apparent and readily totaled because the chains of causation will be longer and more complicated in the financial case.

Respect for the other side, and thus willingness to agree to practical compromise, is one way to avert the catastrophes that loom as logical consequence of the goals of ideological extremists in both types of spectrum.

[ewmayer]

Originally Posted by cheesehead

Your statement that "it only took the official gubbermint number-jugglers a mere year to realize what was quite obvious from anyone following the deflation of the housing bubble", is unjustified on two counts.

First, "the panel that dates American business cycles" is _not_ a government agency. As the article explains, "The declaration was made by a committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts."

Secondly, the committee _has_ to wait for several months to a year after a business peak or trough occurs in order to be able to determine that it's not just a temporary fluctuation that will reverse again in a month or two. Otherwise, it could be in the same position as all the folks who've hastily declared that we reached a global Hubbert's Peak recently, just because there was a drop in global oil production for a while. As I've been saying, we won't be able to determine when Hubbert's Peak occurs until after it has happened and we see evidence that the decline isn't temporary. The same principle applies to defining business cycle peaks and troughs.

From the report you linked:

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

That`s a good methodology, but how many consecutive months of large payroll declines do you need to figure out that it`s not just a several-month statistical blip you`re seeing? Latest estimate is that U.S. employers shed 1.2 million jobs in the first 10 months of 2008 and over 300,000 more were lost just in November. Viewed in the context of a deeply distressed financial sector [banks not gonna be in a lending mood any time soon, despite massive government pressure for them to start doing so], extremely tight credit [= little money for new business creation], a massively overbuilt housing sector and an imploding commercial real estate scene [all those hundreds of thousands of construction-related jobs aren't coming back any time soon], the trend is glaringly, starkly obvious and has been so [except to professional economists, apparently] for most of the year.

The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In concept, the two should be the same, because sales of products generate income for producers and workers equal to the value of the sales. However, because the measurement on the product and income sides proceeds somewhat independently, the two actual measures differ by a statistical discrepancy.

Note: the estimates of GDP - which *are* issued by the "gubbermint" and thus subject to a heavy dose of what John Williams [the phrase is often incorrectly attributed to Kevin Phillips] dubs Pollyanna creep - are used as indicators of "economic activity", which (especially in a consumer-driven economy like that of the U.S.) includes a huge consumer-spending component. Now during the peak housing bubble years, consumers felt wealthy because of the annual double-digit appreciation in home prices and access to easy credit, much of it tied to the value of those overpriced homes. That was one of, if not the, key thing driving consumer spending - it sure wasn`t a concomitant rise in real incomes - which made the GDP growth figures look very robust year-over-year. In other words, debt expansion masquerading as economic growth. Now, over a year of [often massive] monthly declines in the Case-Schiller home price index and the aforementioned drying up of credit tell anyone with half a brain that consumer spending is sooner or later going to drop accordingly, and so must the bubble-inflated GDP numbers. Why do we need a full year to at least tentatively indicate that this may be happening? Instead, until very recently we still had economists [government and private] "expecting" a recovery in the 2nd half of 2008 ... oh wait, make that late 2008 ... did I say late 2008? I meant, of course, sometime in 2009, only a slight weakening in GDP growth, etc. These are not subtle trends underlying what`s going on - at no point in the last half-century have the basic macro trends been more starkly obvious, yet nearly all of professional economists continue to be "surprised" at the severity of the downturn.


[Regarding the California budget crisis]

Originally Posted by cheesehead

Certain conservative strategists (not all of them, but the ones who crafted or sympathize with the think-tank changes back in the 1970s that I've described elsewhere) are quite willing to send this nation, or the entire world if necessary, into a financial tailspin in order to accomplish what they cannot achieve at the ballot box: destroying the "liberal" aspects of government.

And note that the CA Republicans themselves admit that while insisting on "no new taxes", they have no alternative proposals for making up the revenue shortfall. That makes the difference between "principled" and "idiotic".

---------------------

GM, Ford, Toyota, Honda U.S. Sales Slump More Than 30% as Consumers Retrench: General Motors Corp., Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. said November U.S. sales tumbled more than 30 percent as the recession and Detroit automakers’ aid pleas kept buyers away from showrooms.


`Astonishing' U.S. Stock Swings May Last Seven More Months, Futures Show: U.S. stock swings will be more than triple the average for the next seven months as investors contend with a global recession and the worst returns since the 1930s, volatility futures show.

The recession in the U.S., which the National Bureau of Economic Research said yesterday began a year ago, and the 48 percent plunge by the S&P 500 since its October 2007 record drove up the price of options. Futures suggest the market will keep whipsawing investors, elevating the price of equity derivatives as insurance against declines.

The S&P 500 rose or fell 4 percent or more on 26 days since Sept. 15, as bank writedowns and losses from the U.S. mortgage market’s collapse approached $1 trillion worldwide. The last time the S&P 500 had as many 4 percent moves was 1933, when it happened 38 times, according to data compiled by Bloomberg.

My Comment: So with another dozen 4-percent-or-more days in the S&P this month - within the realm of possibility - we would be looking at having as many such high-volatility days in the last 4 months of this year as during the entire previous record-volatility year, 1933. Wild stuff, this.


U.S. Should Sell 100-Year Bonds as Deficit Soars, BlackRock's Fisher Says: BlackRock Inc.’s Peter Fisher said the U.S. Treasury should consider selling 100-year bonds to ease the federal government’s borrowing costs as it faces a budget deficit expected to top $1 trillion.

My Comment: Great idea! Why make our children and grandchildren pay for our misdeeds when we can instaed make their children and grandchildren do it instead?


China Is `Heart of Global Slowdown' as Property Slump Stalls Driver of GDP: House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

“China is now at the heart of the global slowdown,” said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. “It means that global growth is probably going to be dragged down close to zero next year.”

Walker, voted best regional economist in an Asiamoney magazine brokers' poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 percent next year, with a 30 percent chance of a contraction.

My Comment: Those growth estimatesd seem to get lower by the week - just last week the latest downward-revised estimates were in the 8% GDP grwoth range. With millions of workers - many migrants from the rural countryside - losing their jobs each month and many returning to their home districts with few job prospects [especially as much of the former farmland has been converted to nonfarm use, often after illegal exporpriation by corrupt local officials - today`s WSJ has an in-depth article on this], we have a recipe for big-time social upheaval.


Iceland's Crisis Sends Viking Descendants Back to Native Norway for Jobs: Almost 1,200 years after Viking chief Ingolfur Arnarson left Norway to found Reykjavik, the crisis engulfing Iceland is forcing his descendants home.

“There are no jobs here,” said Baldvin Kristjansson, an 18-year-old former container repairman from western Iceland, at a European job fair in Reykjavik. “I’m going to move away and go to Norway.”

The Atlantic island of 320,000, suffering from its worst financial crisis since gaining independence in 1944, faces the biggest exodus in a century. Iceland’s $7.5-billion economy may shrink about 10 percent next year, according to the International Monetary Fund, which is helping provide a $4.6 billion bailout package.

About half of Icelanders aged between 18 and 24 are considering leaving the country, Reykjavik-based newspaper Morgunbladid said, citing a survey of 1,117 people between Oct. 27 and Oct. 29.

“Tens of thousands” will depart, estimated Jesper Christensen, chief analyst at Danske Bank A/S, the biggest lender in neighboring Denmark.

Iceland’s biggest wave of emigration was in the late 1800s and early 1900s. Then, 15,000 out of a total population of 70,000 left, joining a flow to North America from countries including Norway, Sweden and Ireland.

My Comment: Even if only one in ten of the folks [not just in th 18-24 age bracket mentioned in the article] who are considering leaving eventually do so, those are staggering numbers.