Michael Clarke
Back in 1973 we bought our first flat. Significantly it was the same day that the Vestmann Isles erupted. We toddled down to the builder’s office and paid our deposit. That was all the money we had in the world. “How much is it?“ I timidly enquired?-1,500,000 kr. I was told at the present rate. The price was Index Linked!
What did they mean? It gradually dawned on me in the coming months that I had now signed away my soul. I had undertaken Faustian deal with the Devil of the Denarius. Eventually we managed to get a housing loan and donated every hard-earned penny and paid off the flat, living on thin air (and mother-in-law’s cooking.) By the final payment it gone up to by one million! But we were Home Owners. Proudly we sat on our fish boxes admiring our mansion. We would just get the doors, kitchen fittings, floor coverings, light fittings, ceiling, furniture etc. later when we could afford it, at the old price of course!
During the next few years we gradually came to own more and more of this lovely concrete. This was mainly because our housing loan was not INDEX-LINKED.
Some bright spark decided to introduce Index Linking to everything-wages, prices, loans. Paydays became an exciting lotto-like experience as wages hiked every month. Smiles quickly dispersed should you be so unlucky as to need to buy anything.
We used to play the game of “buy it before it goes up” and became avid collectors of every type of home appliance imaginable, quickly ordered from some hardware shop in Grundarfjörður or Grímsey before it went up!
Many of these clever investments were made possible by the generosity of the lady at the corner shop who would keep our cheques till the end of the month.
The next house was bought with an indexed-linked loan. However another bright spark in a new government decided that they would abandon Index Linking, starting with wages! Since then our wages have stayed the same.
The bright sparks, however, were ousted before they could tackle the loans.
Along comes another bright spark and two noughts are lopped off the currency. Suddenly a fancy note becomes a small aluminium coin! They were called-“floating currency” mainly because they were made from such cheap metal they floated in the bath. Sure enough we soon get used to the new currency and in a few years we are back to normal. Our house is now valued at the same price that we bought it for! Economic miracle?-No not quite. It is now worth ten and a half million! Exactly what we paid. IN OLD MONEY.
That makes 1000% inflation. Our loans-they went up by the same amount. Plus interest.
We decided to buy a car. Some bright spark had the idea of the now privately-owned banks lending us money Foreign Currency Linked! This was a much better idea, as there was no Index Linking on these loans.
The banks crashed and the krona crumbled. Our car loan was now 250% higher!
The latest batch of bright sparks have taken over and have promised to put things right. One of the things they promised is getting rid of is-you guessed it- Index Linking.
We are not holding our breath.
Michael Clarke
