Letters from Iceland: SomaFM's Rusty at the Iceland Airwaves festival

SomaFM founder Rusty Hodge is posting updates from the Iceland Airwaves festival this week. Here's his latest installment:

We at SomaFM had made plans to cover the Iceland Airwaves music festival for SomaFM back in August. So in the last two weeks as we heard about the "economic collapse" of Iceland, we were a little nervous as to what the situation would be like over there. By the time we arrived at the Keflavik Airport and got to the Duty Free shop, we realized there wasn't anything to fear. The Duty Free was packed with people buying their allowances of liquor and wine to bring with them to Iceland- because the Duty Free is about half the price of buying liquor anywhere else in Iceland (due to the high taxes on liquor here).

Although when we got on the shuttle bus to Reykjavik, there were only 15 others on it; last year the bus was mostly full. This turned out to be a false impression; 20 minutes after we got to the hotel, a bunch of other people arrived, apparently on a later bus. I guess we were just faster than the normal crowd.

The "Economic Crisis" in Iceland is not being felt too hard on the streets of the city centre. In fact, if you look around, it doesn't seem like anything has happened at all. Banks are functioning like normal- I admit I was hoping to see protests and angry customers waiting for them to open. But even the branches at the big Kringlan mall seemed their normal busy self, and the people in them were happily going about their business.

A few Icelanders have made reference to the "economic crisis" in the same way many Americans refer to our own banking crisis… snide comments about irresponsible bankers, distrust of the way the government will handle things, etc. When asked what has really been affected, they say it's impossible to get a mortgage or car loan right now. Prices for groceries and imported goods have gone up. Real estate prices are falling, especially in "Old Town" Reykjavik, but they'll also point out that's probably a good thing since it was overpriced to begin with. The big complaint is that everything is becoming more expensive. And you can't get a car loan. Icelanders seem to be fond of new cars judging from the cars I see on the streets.

Continued after the jump.

To put it in a different context: I spoke to a German the other day, and he asked how we in the US were doing with our banking crisis. They seem to think that the US if falling apart, and small businesses are failing right and left because of it. I told him that aside from people who were invested in the stock market, it's not visibly affecting people that much yet any more than a typical economic downturn would.

So that's what's going on here in Iceland. People are still shopping, eating, drinking. Tourists seem to have caught on that the exchange rates are very favorable right now. While still somewhat expensive – a McDonald's cheeseburger costs about $2.10 right now, but would have cost $3.00 or more last year. Cocktails at many places are US$7-8, and beers are $5-6. Last year, $10 got you a beer, cocktails were more like $12.

So don't believe everything you read in the media. The stores here are not empty; the people are not living off cod and Skyr. They've just been hit with a recession and the prices on imported goods have gone up. So over the next year they're going to have to be a little more prudent with their spending.