The Hang over of Covid Jordi Pujolá skrifar 23. október 2023 10:30 In my opinion, there is no question that the high inflation in Iceland and around the world is because of Covid. The economy is a complicated mechanism that depends on many factors and moves very slowly. Therefore, you always have to wait to see the effects, impact or consequences of some measures or restrictions. Another problem is that we have a very short memory, the media is always looking for fresh content and we tend to associate the current situation with the last event. When the governments were forced to stop the economy (lock downs, quarantine, traveling restrictions, trade restrictions...), apart from not creating any Gross Domestic Product, they had to subside the private companies, the civil servants, buying very expensive health equipment, vaccines, tests... How did they manage to pay the bill? By making money. So, then the inflation started. Now that we’ve come back to normality, we feel the effects of the Covid, but many people are ashamed and don’t want to admit it. But the damage is done and all the countries have to fight the inflation, especially small countries with a volatile currency. I published an article in Vísir on March 2021 warning about the problem of having a high inflation, so I’m not going to insist on that again. The goal of any Central Bank to stop the inflation is to cool down the economy, in other words, to make the Estate, the companies and the people spend less money. This is not a popular decision, but necessary, indeed. And the main (and powerful) economical tool to stop the inflation is to raise the interest rate. That means: Less and more expensive loans. On the other hand, increasing the price of the money impacts negatively on the Gross Domestic Product again, essential exports like fish, and private companies and people with mortgages. So, this means that Iceland is basically taking the risky option of depending almost only on the tourism. This can be an advantage, but only if it’s temporary. The interest raise must be progressive, the results have to be carefully analyzed before heading to another raise, otherwise instead of cooling down the economy we freeze it. The containment of the economy needs to be shared. There are bleeding big holes on the Icelandic economy like Reykjavík city. The capital has a huge dept and it seems that the only way out is increasing taxes. But on the other hand, despite the massive construction (killing the unique charm of Reykjavík) the housing prices are extremely high and the traffic is getting worse. To finish, I think the Central Bank shouldn’t encourage people to take loans indexed to the inflation because even though they are cheaper on the short term, the consequences on the long term are terrible because the debt always grows up. This only favors the banks. The author is a writer and economist. Viltu birta grein á Vísi? Sendu okkur póst. Senda grein Mest lesið Hefur ítrekað hótað okkur áður Hjörtur J. Guðmundsson Skoðun Halldór 02.08.2025 Halldór Þjóðaratkvæðagreiðsla vegna umsóknar um aðild að ESB er stjórnsýslugrín! Júlíus Valsson Skoðun Bandaríkin voru alltaf vondi kallinn Karl Héðinn Kristjánsson Skoðun Áform um að eyðileggja Ísland! Jóna Imsland Skoðun Ákall til umhverfis-, orku- og loftslagsráðherra að standa við gefin loforð Laura Sólveig Lefort Scheefer,Snorri Hallgrímsson,Sigurlaug Eir Beck Þórsdóttir,Jóhanna Malen Skúladóttir,Ida Karólína Harris,Antonia Hamann,Julien Nayet-Pelletier Skoðun Fólkið í flokknum Helgi Áss Grétarsson Skoðun Kæfandi klámhögg sveitarstjóra Jón Trausti Reynisson Skoðun Greiðsla með Vísakorti tryggir ekki endurgreiðslu – forfallatryggingar gagnslausar þegar mest á reynir Erna Guðmundsdóttir Skoðun Landsvirkjun hafin yfir lög Björg Eva Erlendsdóttir Skoðun Skoðun Skoðun Hefur ítrekað hótað okkur áður Hjörtur J. Guðmundsson skrifar Skoðun Þjóðaratkvæðagreiðsla vegna umsóknar um aðild að ESB er stjórnsýslugrín! Júlíus Valsson skrifar Skoðun Bandaríkin voru alltaf vondi kallinn Karl Héðinn Kristjánsson skrifar Skoðun Erum við á leiðinni í hnífavesti? Davíð Bergmann skrifar Skoðun Ákall til umhverfis-, orku- og loftslagsráðherra að standa við gefin loforð Laura Sólveig Lefort Scheefer,Snorri Hallgrímsson,Sigurlaug Eir Beck Þórsdóttir,Jóhanna Malen Skúladóttir,Ida Karólína Harris,Antonia Hamann,Julien Nayet-Pelletier skrifar Skoðun Kæfandi klámhögg sveitarstjóra Jón Trausti Reynisson skrifar Skoðun Klár fyrir Verslunarmannahelgina? Ágúst Mogensen skrifar Skoðun Vegið að börnum í pólitískri aðför að ferðaþjónustunni skrifar Skoðun Hið tæra illa Gunnar Hólmsteinn Ársælsson skrifar Skoðun Ferðamannaiðnaður? Nei, ferðaþjónusta! Guðmundur Björnsson skrifar Skoðun Hæðarveiki og lyf Ari Trausti Guðmundsson skrifar Skoðun Landsvirkjun hafin yfir lög Björg Eva Erlendsdóttir skrifar Skoðun Fjárskipti við slit óvígðrar sambúðar: Meginreglur og frávik Sveinn Ævar Sveinsson skrifar Skoðun Þau eru framtíðin – en fá ekki að njóta nútímans Sigurður Kári skrifar Skoðun Greiðsla með Vísakorti tryggir ekki endurgreiðslu – forfallatryggingar gagnslausar þegar mest á reynir Erna Guðmundsdóttir skrifar Skoðun Hvers vegna þegir kristin, vestræn menning? Ómar Torfason skrifar Skoðun Trump les tölvupóstinn þinn Mörður Áslaugarson skrifar Skoðun „Já, hvað með bara að skjóta hann!“ Þórhildur Hjaltadóttir skrifar Skoðun Heimar sem þurfa nýja umræðu! Sigurður Árni Reynisson skrifar Skoðun Sársauki annarra og samúðarþreyta Guðrún Jónsdóttir skrifar Skoðun Í minningu sonar – og allra þeirra sem aldrei komu heim Kristín Dýrfjörð,Friðrik Þór Guðmundsson skrifar Skoðun Alþjóðalög eða lögleysa? Urður Hákonardóttir skrifar Skoðun Truman-ríkið: Tilraunir raunheimsins að komast í gegnum gervihvelfinguna Svala Magnea Ásdísardóttir skrifar Skoðun GPT‑5 kemur í ágúst – áskoranir og tækifæri fyrir Ísland Sigvaldi Einarsson skrifar Skoðun Við tölum um vöxt — en gleymum því sem vex Þórdís Hólm Filipsdóttir skrifar Skoðun Verri framkoma en hjá Trump Hjörtur J. Guðmundsson skrifar Skoðun Landið talar Davíð Arnar Oddgeirsson skrifar Skoðun Ætla þau að halda áfram að grafa sína eigin gröf? Kolbrún Áslaugar Baldursdóttir skrifar Skoðun Ísrael – brostnir draumar og lygar Ingibjörg Þóra Haraldsdóttir skrifar Skoðun Ein af hverjum fjórum Silja Höllu Egilsdóttir skrifar Sjá meira
In my opinion, there is no question that the high inflation in Iceland and around the world is because of Covid. The economy is a complicated mechanism that depends on many factors and moves very slowly. Therefore, you always have to wait to see the effects, impact or consequences of some measures or restrictions. Another problem is that we have a very short memory, the media is always looking for fresh content and we tend to associate the current situation with the last event. When the governments were forced to stop the economy (lock downs, quarantine, traveling restrictions, trade restrictions...), apart from not creating any Gross Domestic Product, they had to subside the private companies, the civil servants, buying very expensive health equipment, vaccines, tests... How did they manage to pay the bill? By making money. So, then the inflation started. Now that we’ve come back to normality, we feel the effects of the Covid, but many people are ashamed and don’t want to admit it. But the damage is done and all the countries have to fight the inflation, especially small countries with a volatile currency. I published an article in Vísir on March 2021 warning about the problem of having a high inflation, so I’m not going to insist on that again. The goal of any Central Bank to stop the inflation is to cool down the economy, in other words, to make the Estate, the companies and the people spend less money. This is not a popular decision, but necessary, indeed. And the main (and powerful) economical tool to stop the inflation is to raise the interest rate. That means: Less and more expensive loans. On the other hand, increasing the price of the money impacts negatively on the Gross Domestic Product again, essential exports like fish, and private companies and people with mortgages. So, this means that Iceland is basically taking the risky option of depending almost only on the tourism. This can be an advantage, but only if it’s temporary. The interest raise must be progressive, the results have to be carefully analyzed before heading to another raise, otherwise instead of cooling down the economy we freeze it. The containment of the economy needs to be shared. There are bleeding big holes on the Icelandic economy like Reykjavík city. The capital has a huge dept and it seems that the only way out is increasing taxes. But on the other hand, despite the massive construction (killing the unique charm of Reykjavík) the housing prices are extremely high and the traffic is getting worse. To finish, I think the Central Bank shouldn’t encourage people to take loans indexed to the inflation because even though they are cheaper on the short term, the consequences on the long term are terrible because the debt always grows up. This only favors the banks. The author is a writer and economist.
Ákall til umhverfis-, orku- og loftslagsráðherra að standa við gefin loforð Laura Sólveig Lefort Scheefer,Snorri Hallgrímsson,Sigurlaug Eir Beck Þórsdóttir,Jóhanna Malen Skúladóttir,Ida Karólína Harris,Antonia Hamann,Julien Nayet-Pelletier Skoðun
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Skoðun Fjárskipti við slit óvígðrar sambúðar: Meginreglur og frávik Sveinn Ævar Sveinsson skrifar
Skoðun Greiðsla með Vísakorti tryggir ekki endurgreiðslu – forfallatryggingar gagnslausar þegar mest á reynir Erna Guðmundsdóttir skrifar
Skoðun Í minningu sonar – og allra þeirra sem aldrei komu heim Kristín Dýrfjörð,Friðrik Þór Guðmundsson skrifar
Skoðun Truman-ríkið: Tilraunir raunheimsins að komast í gegnum gervihvelfinguna Svala Magnea Ásdísardóttir skrifar
Ákall til umhverfis-, orku- og loftslagsráðherra að standa við gefin loforð Laura Sólveig Lefort Scheefer,Snorri Hallgrímsson,Sigurlaug Eir Beck Þórsdóttir,Jóhanna Malen Skúladóttir,Ida Karólína Harris,Antonia Hamann,Julien Nayet-Pelletier Skoðun
Greiðsla með Vísakorti tryggir ekki endurgreiðslu – forfallatryggingar gagnslausar þegar mest á reynir Erna Guðmundsdóttir Skoðun