http://www.economicdisasterarea.com/index.php/features/mishkins-iceland-fail-video/
Tyler Durden at ZeroHedge points out this video of Columbia University economistFredric Mishkin who has changed the title of his 2006 pen-for-hire paper on Iceland’s economic state from Financial Stability in Iceland to Financial Instability in Iceland.
Some time ago we penned a post, titled”Mishkin On Iceland: “Nothing Is F*#&ed Here Dude” which discussed the former Fed director’s March 2006 analysis “Financial (IN)stability in Iceland”. Those interested in our original observations of Mishkin’s horrendous analysis (of what proved to be the first bankrupt European country of the new century, but certainly not last) can find them at the original link. Yet continuing with the Duderino references, today, new ***** has come to light, which once again confirms that not only is the Fed populated by the most intellectually incapable and corrupt people, but that anything coming out of Columbia University (and the Ivy League in general) is not worth the paper it is printed on. Watch the attached clip to see a former Fed director go from comfortable, to fidgety, to stuttering, to thoroughly discredited, to in dire need of diaper change, in under 2 minutes. Last but not least, here is the soundbite of the year: “You have faith in the central bank.” No further comment necessary.
Why would a noted professor who wants to be taken seriously do such a thing?
Probably because he should try to distance himself as far away from the reality that his report was commissioned by the Chamber of Commerce in Iceland as a false reply against an avalanche of criticism which hit Iceland financial world in 2006. Mishkin got paid $124.000 to write the report with then Independence Party economist for hire Tryggvi Thor Herbertsson. If Mishkin had done any independent research he would have quickly been aghast at the foreign debt accumulating, the bubble forming
My belief is that he actually only lent his name. The wording of the report looks suspiciously like it originated from the Chamber of Commerce’s spin machine. It would be
interesting to hear how much time Mishkin spent on the report, which documents and statistics he researched and who he spoke to.
Like Transparency International and the damned ratings agencies, Frederic Mishkin failed enormously in getting below the surface of Icelandic politics, history and financial markets.  Danske Bank, Merrill Lynch and the IMF did not. They rung the alarm bells.  Robert Z. Aliber and Robert Wade did as well. The analysis of the former lead to the chairman of the Icelandic Financial Services Association threatening professor Thorolfur Matthiasson that he would never get any grants from the group again for bringing such a man into Iceland.
Hopefully Mishkin held on tight to his $124.000. Within three years they had doubled in value in Iceland.
Let us hope Mishkin’s students grill him on the subject if anyone is still listening.














Here is a check-list which they would be well advised to bring to class.
1. How much time did you spend on the report?
2. Which documents and sources did you use to reach your conclusions?
3. Did you know that your co-author Tryggvi Thor Herbertsson was a trusted member of the ruling Independence Party?
4. Did you know the IP had appointed its former head as Central Bank governor, with no background in economics at all?
5. Did you understand the close ties between the movers and shakers in the IP government, the Central Bank, the Financial Authority, the Chamber of Commerce and the banks? If so how could you reasonably claim academic integrity behind the report?
6. Did you understand the power struggles between the Central Bank governor and some of the largest owners and executives of the Icelandic banks?
7. Why did you report contradict noted researchers at Danske Bank, Merrill Lynch and IMF? Was the report made to order?
8. Why did you not reveal the large payment you received from the Chamber of Commerce in the report? Did you get any other amenities paid for, such as reindeer hunting trip in Iceland with your co-author?
9. Why did you change the name of the report on your CV from Financial Stability in Iceland to Financial Instability in Iceland? How would you react if your students did such a thing?
10. As a professor how would you grade the report in light of recent events in Iceland?
The report:

Tryggvi Herbertsson Friedrich Mishkin – Financial Stability.pdf
Other reports from 2006:
We see the risk in these firms as higher than for equivalent firms in the European market that we cover as they are more dependent on volatile (in our opinion)
revenues, have greater concentrations of risk and much more uneven funding profile than we would expect to see in equivalently rated European A-rated banks, especially
in the Nordic region.

JP Morgan 060324 Icelandic banks.pdf
The Icelandic banks have a unique set of credit weaknesses that in our opinion merit a significant risk premium to other European banks.

Merril Lynch Iceland 2006.pdf
On most measures, the small Icelandic economy is the most overheated in the OECD area. Unemployment stands at 1%, wage growth is above 7% and inflation is running above 4% despite a strong ISK. The current account deficit is closing in on 20% of GDP. The Icelandic central bank has been hiking rates substantially in order to cool the economy, and rates are now above 10%. Based on the macro data alone, we think the economy is heading for a recession in 2006-7. GDP could probably dip 5-10% in the next 2 years, and inflation is likely to spike above 10% as the ISK depreciates markedly. However, on top of the macro boom, there has been a stunning expansion of debt, leverage and risk-taking that is almost without precedents anywhere in the world. External debt is now nearly 300% of GDP, while short term external debt is just short of 55% of GDP. This is 133% of annual Icelandic export revenues. We look at early warning indicators for financial crises and conclude that Iceland looks worse on almost all
measures than Thailand did before its crisis in 1997, and only moderately more healthy than Turkey before its 2001 crisis.

Iceland Geyser Crisis.pdf