Guerrilla bankruptcy

15 July 2009

I think we would call this a default

I think we would call this a default

Because I’m generally between one and six months behind the rest of the world at any given time, I’ve been sitting on this BBC story since late June.  Best line:

BBC Reporter: It must take quite a lot of work to crush a five bedroom house.

Icelander: Yeah… about six, seven minutes.

The short version is that an Icelandic man was going bankrupt and about to have his house foreclosed upon by his bank.  After planning it “for months,” he hired a bulldozer and destroyed his own house instead, leaving himself and his family homeless.  Six of one, I guess.

I have to confess that I’m a bit surprised we’ve seen nothing like this sooner.  Despite the fact that in some parts of the country (namely where I live) the mortgage distress rate is 20% or higher, there is apparently a sense that things can get worse – or at least that the entire system of home ownership hasn’t quite broken down.  (Yet.)  But then we’ve only just come out of the sudden stunning fall of last year – now we seem to be entering not recovery but the long slow grinding movement of finding our way out the mire.  It’s not the trauma of the fall that induces such little revolutions – it’s the awful economic purgatory now following.

That it occurred in Iceland, then, makes sense.  They were the first to really go down in the current economic chaos and they fell harder than most.  Iceland is an expensive nation to live in with nothing much in the way of economic advantages (besides a highly-literate, educated workforce – and I can personally attest that this is not in much demand anywhere these days), but they were a solid investment for most of the past 20 years.  As Iceland is, despite its location, broadly Scandinavian, its population is almost entirely middle-class and employed in the service economy and so they were hit terribly by the recession.  It was clear from the start that recovery would be far off.

And now we see this.  It’s an almost Robin Hood gesture, and it seems calculated to inspire copycats.  (And indeed many Icelanders will have a lot of free time on their hands with an unemployment rate of 7% and rising.  This may seem low by our standards, but in a more social democratic society where general prosperity and full employment are emphasized this is a dramatic rate – as is 17% inflation.)  What a grand middle finger to his bank as they seek to take a house that few if any people could actually afford to buy now and that it will be unable to use itself, save to potentially recover a small taste of its investment.  And what will they do to him and to his family now?  Offer him a loan to pay the cost?

The BBC reporter doing the piece isn’t terribly pointed in his questions, but he does manage one incisive comment: Icelanders are generally rather dull, even-tempered people.  If frustration and desperation moves them to such acts, how long before we start to see people in America do the same?

My only question is this: how long until Americans start doing the same thing?

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