thoughts of the driverSteinn Eldjarn Sigurdarson on tech, tel, digital freedom and possibly his life..

I heard an interesting thing today, from an Icelandic economist, who recently joined the parliament. The Icelandic debts due to Icesave and other failed banks, valued at $5.8 billion, would be a huge burden on the Icelandic economy — paying these debts would require several years of reduced infrastructure (healthcare, education, social services), as well as selling some natural resources (at a time when it’s a buyers market, no less). He said, that if you take this debt as a proportion of the UK’s GDP, and and then multiply that percentage with the Icelandic GDP, the resulting number would be something rather trivial — around 300 million ISK (if I heard him correctly), which is equivalent to about 2.5 million dollars. Pocket change for a big country, right?

Now, because I thought this was pretty amazing, I went ahead and did some of my own calculations, and based on the GDP figures for Iceland and UK, as reported by Wolfram Alpha, and the (700.000.000.000 ISK = $5.8 billion) icesave-related debt, I decided to do some calculating.

As you can see here, I calculated that for an economy of the size of UK, to pay off the $5.8 billion, would be about the same load relative to the GDP, as if Iceland was paying off a debt of $39 million. Now, that’s obviously more than an order of magnitude away from what the Icelandic MP quoted (although him being an economist, and me being a programmer, I left the fields on my little calculator open for change!), it’s maybe not what I’d consider pocket change for the Icelandic government, as 0.21% of a country’s GDP shouldn’t be, but it’s a damn sight more possible than the possibility of paying more than 30% of a country’s GDP. To put the debt into more perspective, the entire Icelandic government budget for 2009 is $4.6 billion.

So, the idea of the exercise was pretty much to verify my MP’s claim, but on further examination, I figured out a couple of interesting things as well: what is currently happening to Iceland, if it were to happen to the UK, at the same scale the UK public would be asked to accept liabilities of around 864 billion dollars. Now, I’m not defending any bankers, but I’m pretty sure that UK public opinion on that kind of “bailout” would be rather divided, to say the least.

I Hope to get some reactions — especially in case I’ve made some drastic mistake somewhere (excuse: this was a quick hack at the end of the day, in order to procrastinate a bit!).