"No no no no no ...."

July 17th

The bike ride started from the old harbor.  The temperature was 15C.  Cloudy.  Little breeze.  I wore a sweatshirt.  Our guide was a native.  Agnar.  The first thing he said, "Want a jacket?"  I looked him over.  He had a shirt on.  And a sweatshirt.  And a sweater over that.  Plus a jacket.  "All right."  Neither one of us took anything off the entire time.  I should have worn more.  It was wicked cold on the other side of town.

The Fairie Rock was our first stop.  Agnar went on and on about fairies coming out of the rock and going back into the rock and what made them go in and what made them go out.  Everybody in the group listened politely and wondered what we'd gotten ourselves into.  Apparently there is a strong belief in fairies among the Icelanders.  It's an entertaining fantasy.  They go with it.  Maybe it helps explain why Iceland is so much fun.

Agnar was a fabulous leader.  After discussing fairies for 10-15 minutes he jumped on his bike without warning and took off.  We caught up with him at the university.  Before the crash in 2008 tuition wasn't free like it is in Norway.  But it was affordable.  Prices skyrocketed after the crash.  Now that tourism has gained momentum and national income is climbing again tuition rates are leveling off.  Still, it costs serious money to attend college in Iceland.  Health care used to be cheap too.  Now the best doctors and nurses leave Iceland because they can earn more overseas.  Pensions were restructured as well.  The people of Iceland took it all in stride, knuckled down, worked harder, worked smarter, and got back on track.

The financial crash was similar to Europe's.  Real estate development took off.  The banks financed it with loans denominated in dollars and euros.  The mortgages were in kroner.  Then the market collapsed.   The kroner's exchange rate made it impossible to pay back the loans even if no borrowers defaulted.  Of course the defaults did cascade, putting the banks in technical bankruptcy.  Anyone who has seen "It's a Wonderful Life" knows that banks can keep operating as long as the depositors don't ask for their money back.  In this case they did.  Most depositors were hedge funds, sovereign wealth funds, family offices, and other rich investors seeking high yields.

The government paid them back.  It bailed out the banks.  The banks paid the creditors.  The citizens paid higher taxes and received fewer services.  Agnar thought they should have let the banks go bust.  That argument didn't prevail in America and it didn't in Iceland either.

The Panama Papers recently were leaked.  Agnar discussed them as we rode by the official prime minister's residence.  In April 2016 Iceland's prime minister had been interviewed on "60 Minutes" about whether or not he had any offshore accounts.  "No no no no no no ....."  Your signature is right here.  You sure?  Sigmundur Gunnlaugsson ran from the cameras, resigned the next week, and hasn't been seen in Iceland again.  The Panama Papers are a trove of original documents created by an offshore law firm.  They describe how hedge funds, sovereign wealth funds, family offices, and government officials avoid taxes and steal money.  Gunnlaugsson is married to the wealthiest woman in Iceland.  One of her companies invested in Iceland's banks before the 2008 crash.  It was repaid in full.

What about the Clintons?  They are not involved with the Panama Papers.  (Not yet at least.)  But there is a connection to Iceland.  The former president visited Rykjavik after leaving office to attend a conference.  While the other honchos ate a catered dinner President Clinton snuck away to Baejarins Betzu Pylsur, a local hot dog stand.  Crowds swarmed around him as he ate what became known as the "Bill Clinton" -- a hot dog with mustard!  It's still on the menu.

Bobby Fischer put Rykjavik on the map. In 1972 he defeated Russia's Boris Spasky for the world chess title.  Russians had owned the championship before that.  Years later the ungrateful American government wanted him extradited.  Fischer had "illegally" played chess in Yugoslavia during the civil war.  Iceland came to his defense.  They provided asylum.  Fischer died in 2010 and is buried 60 kilometers outside of Rykjavik in Selfoss.  Gail and I drove by the memorial during the Golden Circle trip.  Fischer died with millions in the bank.  His wife was Japanese; his mistress Filipino. The mistress had a daughter.  She sued the estate.  Fischer's body was exhumed.  The DNA test showed the daughter wasn't his.  Fischer's wife ultimately collected the money.  Except for the various fees that were paid to the Icelandic government.  The U.S. government also sued but came up empty.

The fish market was our final stop.  Fishing has been an economic mainstay for centuries.  It still represents 15% of Iceland's GDP.  The catch is high quality.  According to Agnar Iceland generates 12% of the world's wholesale revenue from fishing even though by weight it's only 1%.  In the 1970s Iceland's Coast Guard battled it out with British trawlers that tried to operate inside the new 200 mile limit.  It cut their nets.  Today those waters are exclusive to Icelandic fishermen.  The British also lost out to Norway around that time.  Norway insisted on a generous interpretation of the 200 mile limit.  Britain acceded.  A few years later Norway discovered oil reserves in the disputed area worth billions.