March 23, 2008

Credit Crunch Making Iceland Affordable Again

AS MANY TRAVELERS know all too well, the annoying weakness in the U.S. dollar is good for our exporters but not so good for our tourists, who travel overseas to find their dollars are increasingly becoming less and less valuable. As one wit famously put it, having dollars in London -- where the dollar now buys just 50p, compared to 72p or so back in 2001 -- is like having Mexican pesos to spend in New York.

But of course, the pain is not just limited to Yankees buying sterling. The dollar once bought 1.20 euros -- now, it buys just 65 euro cents; when it once bought about 135 Japanese yen, now, it buys just 100. The dollar once bought 8.3 Chinese yuan -- now it buys just seven. The once-mighty dollar once bought 1.80 Swiss francs -- now, it takes a penny more than a dollar to buy a Swiss franc.

One could go on -- and why not? Even once-toxic currencies like the Russian rouble and the Argentine peso and the Lebanese pound have been appreciating against the dollar. I mean, my God. Nearly everywhere you look, it's an utter rout.

But the key word is "nearly." There are some bargains out there, if you look closely. Jamaica, for instance. It is not someplace I would want to go, but the Jamaican dollar has weakened steadily over the past several years. Mexico, a place I do like visiting, is so closely tied to America's economy that its peso has been stable. Then, there's Venezuela's bolivar -- that's gone to hell since Chavez took power and started wrecking the place. So there's a little unrest -- it's cheap! Take two weeks!

And then, there's Iceland. Yes, that Iceland. You've seen pictures! You know the drill -- 300,000 people, all of whom look like models; midnight sun; hot springs; lots of seafood; kickass ring road that takes you around the whole damn place. Oh, you can also eat whale meat. OK, so that's not a selling point for most people, but I'd give it a go.

Anyway, as it turns out, the international credit crunch is playing havoc with Iceland's economy. The country's banking sector is in a world of pain, and prices on credit-default swaps have risen dramatically. For a look at the troubles facing the Icelandic economy, here's a good overview. The upshot for us, however, is that Iceland's krona is now depreciating against the dollar, and Iceland's loss is our gain. In just this past week, the ISK has fallen from about 71 to the buck to 79 -- at one point hitting 82. This is good news for Yankee tourists, because only a short time ago it took just 60 ISK or so to buy a dollar. The way things are going, perhaps things will get worse, and the Icelandic people will be even more welcoming to foreign tourists with strong, valuable American dollars.

At least, I hope so, because I'd like to think I could afford a nice exotic vacation someplace cool. And the way things have been going with the dollar, even Canada has suddenly become expensive. Gah!

Posted by Benjamin Kepple at March 23, 2008 10:53 AM | TrackBack
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