April 16, 2021

Iceland’s Big Thaw

During Iceland’s boom years, which lasted from 2003 until 2008, a customer showed up at Guffi’s dealership wanting to buy a Porsche on credit, no money down. Guffi didn’t inquire about the man’s line of work; in fact, he didn’t care if the man paid back the loan — that was the bank’s problem, not his. Guffi sold the Porsche, and the customer drove it for a month or so until the first payment was due. The man had no interest in making the payment, and so Guffi, who always aimed to please, helped the man resell the vehicle for a profit. Guffi did the same thing a month later, and again a month after that; all told, Guffi sold the same car five times in six months, amazingly charging a higher price on each successive sale.

To understand how this strategy was even possible, it helps to know a little about banking in Iceland. In 2001, the Icelandic government began relinquishing control of the banking sector to allow for privatization. One consequence, says Gylfi Zoega, a professor of economics at the University of Iceland, was that “ownership of the banks went to a few wealthy businessmen.” These businessmen, Zoega says, hired local bankers, who had very limited experience in international banking, to run things; they issued bonds on the international market, where institutional investors were only too happy to buy them. After all, this wasn’t Argentina — this was Iceland, a Scandinavian country whose national banks had no history of defaulting on their loans. “It appeared to be a sound investment,” Zoega says. Money poured into the country, and the economy boomed. With the help of the banks, investors went on spending sprees, buying large stakes in foreign and domestic businesses; the prices of everything from houses to used cars soared; Iceland’s stock market spiked, rising 900 percent between 2002 and 2008; and, of course, money flowed into the hands of all sorts of Icelanders, like Guffi.

Guffi sold a lot of cars during the boom, but he didn’t save much. When I asked him what he spent his money on, he replied that he traveled widely, skied often and entertained a number of girlfriends from abroad. “Take a look at the beautiful girls from Ukraine and Switzerland,” he told me wistfully. “You’re like a kid in a toy store. Several times, I’ve brought them home so that they can have a vacation here. Then I show them Iceland.” He added, thoughtfully: “What I was doing was good for the tourism business.”

At first, it was all going splendidly for Guffi as he Rollerbladed down Laugavegur Street with voluptuous girlfriends and sold and resold the same luxury cars. Then he became tired — exhausted, really. He was working 13-hour days. “Do you know how much time it takes to bring all those papers to the bank every time someone takes out a loan for a car?” he asked me. The girlfriends also proved enervating. “I found girls on the Internet; that’s heavy work. You’re reading all these stupid letters that they send.” By the time the crash hit, in late 2008, Guffi was relieved. Nowadays he sells fewer cars; he no longer regularly earns more money each time he sells the same car, but he still gets a commission, and his lifestyle is simpler. “I do nothing stupid, and then I have no stress,” he explained happily. “I have no more Ukrainian or Swiss girlfriends. I have an Icelandic woman now.”

Jake Halpern (jakehalpern@yahoo.com) is the author of “Fame Junkies.” His last article for the magazine was about freegans in Buffalo. Editor: Sheila Glaser (s.glaser-maggroup@nytimes.com).

Article source: http://feeds.nytimes.com/click.phdo?i=0b88b65acb84555699bb20e15fdfa536

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