Iceland’s Central Bank has never been better equipped to ensure stability to serve the people, claims Governor Ásgeir Jónsson. With the merger of The Bank and Financial Supervisory at the start of 2020, the Bank is stronger than ever to enforce discipline on financial markets to improve the welfare of the people.
By Hallur Hallsson. Photo: Páll Stefánsson
Dr. Ásgeir Jónsson was appointed Governor of Iceland’s Central Bank in July 2019, at 49 years of age. His appointment is for five years, so he has three more years to serve. “What will be, will be regarding a second term”, he says. His emphasis is to establish the Bank’s independence. His background is different from many of his predecessors; there was no politicking for his appointment. He has been called a communist and a liberal but has never been active in politics. However, he has made his stance clear on many issues that the Bank has to deal with.
Ásgeir Jónsson’s forefathers were farmers and fishermen and he, himself, was a fisherman aboard trawlers from the town of Sauðárkrókur in the North—and never got seasick! However, though Dr. Jónsson is the Bank Governor, the highest office that an economist can attain to, he faced extreme challenges as a child: stammering, illiteracy and bullying. He was raised, until he was eleven years of age, at Bjarnarhöfn, Snæfellsnes – Bear Harbour – where his father Jón Bjarnason [1943] was a farmer jointly with his brother, Hildibrandur [1936-2017] and father, Bjarni Jónsson [1908-1990] from Asparvik – Aspen-Inlet at Strandir in the Northwest.
A stammer and slow to read
“I had difficulties with reading until finally the age of eight or nine”, Ásgeir says in an interview with Icelandic Times. The learning was based on knowing the letters, starting with A and then B and so on. This was Greek to the young boy. To make things worse, he stammered and was bullied. Ásgeir reads differently to most people, as he sees words as pictures. This is possibly a form of dyslexia but Ásgeir has never been diagnosed. He solved that matter himself. “I didn’t do well at school and yearned to be able to read”, he says. Then one day he was able to connect the dots. Words manifested themselves in pictures and he was able to read, the letters were out of the way. This was a major revelation to him. He started reading the Sagas, beginning with Eyrbyggja, the regional Saga and then the other Icelandic Sagas, one by one. A brave new world appeared to him. “In fact, I became a fast reader almost overnight. That has helped a lot in my studies and job”, he says. However, he still makes spelling mistakes as letters tend to mix within words. “I was raised on a farm with no playmates, only adults and the animals. There were no computer games and TV programmes were simple”, he says. He spent his time in his grandfather’s library and became passionate about the Icelandic Sagas—and still is. At Akureyri’s College, he attained 10 in Icelandic on the Sagas. “That is the grade that, to this day after all the studying, I’m most proud of.”
Born in Norway 1970
Ásgeir was born at Aas, in Norway in 1970, second of six siblings. His father was studying agronomy at Aas University. In 1971 the family moved to Bjarnarhöfn farm between the towns of Stykkishólmur and Grundarfjörður. It is a well-known farm that had been bought in 1914 by Thor Jensen [1863-1947], a Danish man, who had arrived in Iceland at the age of 13 and led Iceland’s fishery revolution at the start of the 20th century. Thor Jensen built sheep sheds at Bjarnarhöfn, even though he was leading Iceland’s fisheries revolution. Ásgeir’s grandfather and his sons had 700 sheep.
At the age of eleven, Ásgeir moved with his parents to the ancient bishopric at Hólar in Hjaltadal in the north, one of Iceland’s most historic places, where Iceland’s last Catholic Bishop, Jón Arason [1484-1550] was a central figure. It does not come as a surprise, therefore, that Ásgeir has written about Jón Arason with deep insight. His historical work, “Uppreisn Jóns Arasonar – Jón Arason’s Revolt” was published this year. Ásgeir puts the power-struggle between the Danes and Germans into perspective.
Bishop Jón Arason was a Catholic bishop backed by the Germans, however the King of Denmark had signed an Executive Order that Icelanders should turn to Lutheran worship. Bishop Jón Arason was beheaded at Skálholt Bishopric in 1550 and the king’s servants raided Iceland’s churches and monaster-ies of gold, silver and valuables and transported them to Denmark. That was the beginning of Copenhagen’s elite taking over the country, followed by the Trade Monopoly [1602-1787]. Iceland was run as a colony. These were Iceland’s Dark Ages.
Economics became his passion
Ásgeir studied at Akureyri’s College and graduated at twenty years old in 1990. After pondering about whether to study biology, medical science or become a fisherman, he found his passion in economics and enrolled at Iceland’s University. He graduated in 1994. His BS paper, ‘Siglt gegn vindi’ – Sailed against wind – deals with Iceland’s economy from 1400- 1600. The year before his graduation, he began working for the Dagsbrún,– Day Ascending – Labour Union, where Iceland’s legendary labour leader Guðmundur Jaki – ‘the giant’ – Guðmundsson [1927-1997] was supreme. People debated whether the 23-year-old economist was a communist or a liberal, but Gvendur Jaki always referred to him as the “University kid”. Ásgeir got to know Iceland’s most loved labour leader in his final battle. Gvendur Jaki had revolted against the economists at Iceland’s Confederation of Labour and so he wanted a ‘foal’. “I was that foal,” Ásgeir says with amused expression.
Ásgeir was constantly reading, seeking knowledge. He went to Indiana, USA and finished his Master’s Degree from the University of Indiana in 1997 and his doctoral thesis in 2001. Ásgeir has been quoted that his stammering intensified when he was teaching in English. He started speech coaching at Indiana Speech, getting his English stammering out of the way. Dr. Ásgeir Jónsson has had to tackle and defeat his demons to become the man he is and Governor of Iceland’s Central Bank.
Chief Economist at 33 years of age
He returned to Iceland and became Chief Economist of Kaupthing Bank, aged 33. At the turn of the century, Iceland’s credit was a triple AAA. For some reason, the Financial Supervisory had been moved out of the Central Bank in 1998 during Finnur Ingólfsson’s tenure as Minister of Commerce. That took the sting out of the Central Bank. The banks were privatised and what was called ‘the modern Viking raids of Europe’ began.
“I was a very young Chief Economist. We were new kids on the block, inexperienced. I wasn’t in the innermost circle of Kaupthing, although I was the face of Kaupthing as the media sought my comments on Iceland’s economy and forecasts”, Dr. Ásgeir says. He became well known, quite a celebrity. When the banks collapsed and with them the Icelandic Economy, he became one of the culprits. He started researching what had gone wrong and wrote “Why Iceland, an inside account of the meltdown’s fascinating and far-reaching tragedies… in painstaking detail”. “Why Iceland” was written in English and translated into Japanese, German and Arabic. It is the most referred to book on Iceland’s banking collapse.
Dr. Ásgeir was involved in Kaupthing’s resurrection with new name, Arion Bank. At the age of forty, he wanted a change so he left banking. He became professor at Iceland’s University. It came as a surprise to many when, eight year later, Dr. Ásgeir was appointed Governor of the Central Bank—and some were quite critical. Dr. Ásgeir finds that understandable. “I believe that none of us who were in the whirlpool of the Collapse are the same. In retrospect, I would have done things differently. However, my involvement in the Collapse in itself helps me. I know the banks inside out and the pitfalls to debate the banks, as well as other special interest groups. Unlike my predecessors, I have inside knowledge of the banks. That gives me confidence in the never-ending struggle between special interest groups”, he says.
Despite the Banking Collapse of 2008, Dr. Ásgeir believes that those years had their positives. Iceland managed to establish massive international firms that are still operating. Governments have done well in the build-up after the Collapse and the Emergency Laws were the foundation to refinance the economy. Icesave united the nation, as it revolted against UK, Dutch and EU bullying. “Companies, politics and the public learnt their lesson. We are more careful. This can be seen in how companies are run, with fewer debts and more professionalism”, he says. “The banks took over Iceland, didn’t they?” “Yes, they did”, he answers.
Tragic loss of a sister in 2011
The years after the Collapse were difficult for Dr. Ásgeir and his family. His sister Katrín died of cancer in 2011. He discussed the loss with Fréttablaðið before he took office in 2019. “When people get sick with cancer, the younger they are, the tougher the sickness. Katrín was diagnosed with the disease, went into therapy, and seemed to be cured. However, the disease resurfaced, and she died in only six months”, he says. “It was horrifying to see how the cancer took everything from this beautiful young woman, who had been so healthy. Her sight, movements and then life itself.”
It is obvious that it is tough to recall. “This was immense and without warning. It shocked everyone in the family. Katrín had always been healthy, and cared for herself better than most,” says Dr. Ásgeir. “Neither my parents nor brothers and sisters have been the same since and we’ve stuck together more. After such loss, one understands better what really matters in life”, said Dr. Ásgeir in the interview with Fréttablaðið. His father, Jón Bjarnason, served in the government of Samfylking and Vinstri græn—the Left Alliance and Left Greens — from 2009-2011, when his daughter died.
Appointment not politically biased
How is Dr. Ásgeir Jónsson different from his predecessors? “People don’t know me for my political standpoints nor was the appointment based on politics. I’m independent of special interests. My commitment is to the Icelandic people and their well-being”, he says. No special interest group was involved in his appointment. Freedom of Speech is the Governor’s weapon and he’s fearless in taking on special interests, such as the pension funds or labour unions, companies and their Confederation, quota-owners and politicians. He has, for example, criticised the political parties for not building Sundabraut – the main road out of Reykjavík to the west and north, the municipality of Reykjavík, for inexplicable lack of building land and the giant fishing company, Samherji in Akureyri, in their quarrels with the Central Bank, criticizing, naming and going after individual public servants.
“I’m independent and I realize that I am dealing with powerful special interest groups, who may or may not be happy. I am my own master, and my allegiance is with the people of Iceland and their interest. I realize that this may lead to me not serving a second term. If so, then so be it”, says Dr. Ásgeir.
Welfare policy and low interest rates
The Central Bank’s policy is to ensure the people’s welfare. Stability is key, he says. “The monetary policy is crucial for low-income people, who stand to lose most if inflation gets out of hand or during recession. This is my focal point; it matters to me. The monetary policy is welfare policy. My goal is low inflation and low interest rates. These are fundamentals for a higher standard of living in Iceland”, he says.
Dr. Ásgeir, criticizing Samherji for attacking individuals at The Central Bank, was much talked about, but can it continue, that 12-15 people – or what the actual number may be – are in charge of Iceland’s fishing quotas with a yearly turnover of ISK 300 billion – over 2.3 Billion US Dollars? “This is a political question, which in itself is not for me to decide or debate,” he says.
Dr. Ásgeir points out that The Central Bank, for the first time in Iceland’s economic history, has powerful tools and independence at its deposal to ensure stability. It’s a different era. A solid króna is key to Iceland’s solid economy. With the merger of The Central Bank and The Financial Supervisory in 2020, the Bank got wide-ranging authority. Never before has an institution had such wide-ranging powers over the commercial banks. The Currency Reserve is at a historical high of ISK 900 Billion – 7 Billion US Dollars – and that’s huge for a nation of 330 thousand. “Iceland had soft landing at the end of Covid. The Bank sold ISK 200 Billion of its Currency Reserve, ensuring stability. Icelanders are, like never before, at a crossroads to run their economy and deal with inflation and depression. The Króna did well through Covid’s rough seas. Never in Iceland’s economic history, has an institution had such responsibility as does The Central Bank at present”, says the Governor.
The Soft Landing
Dr. Ásgeir emphasizes that he must hold his cool and not overestimate himself but stay humble. The Icelanders are fatalists, nature gives and nature takes and all will be well. These elements are engraved in the nation’s psyche. The nation has shown serenity in face of adversity, for example during the Cod Wars with Britain, The Banking Collapse and now the Covid pandemic. The Central Bank worked closely with the government during Covid, and the nation had weathered the storm. Now, it’s important to ensure balance in government spending. We see the Mediterranean nations struggling, and indeed Europe and America, where money is being printed feverishly, meaning inflation and a lower standard of living in the Western World. Uncertain times are ahead but Iceland is in better shape to deal with the future than most nations.
Uppreisn Jóns Arasonar – Jóns Arason‘s Revolt – by Dr. Ásgeir Jónsson is a must-read about one of Iceland‘s most dramatic and consequential event. With the execution of Hólar’s Catholic Bishop, Jón Arason, governmental power was moved to Copenhagen. The king took over land ownership of the Church, fish and brimstone. He confiscated all of the gold, silver and valuables, which were transported abroad. Copenhagen’s merchants were handed Iceland to exploit and the infamous Monopolistic Trade [1602-1787] was enforced. Iceland was closed to foreign relations. Iceland practically became a Danish colony. Iceland’s dark ages followed with poverty and isolation. Jón Arason [1484-1550] was the son of a widow, born at tiny cottage Grýta in Eyjafjördur in the North, educated at Munkaþverá Cloister close by. He became a Catholic bishop at the age of 36. Jón Arason postponed the Lutheran Reformation for almost a decade. He had reached agreement with King Christian III [1534-1559] that Hólar bishopric would continue to be Catholic, and his son Sigurdur would succeed him. However, there was an intense power struggle involving Iceland. Jón Arason was born towards the end of the “English” 15th century when the English and the Germans would grapple to buy fish from the locals. Dr. Ásgeir writes about the commercial war between the Danes and Germans that started in 1547. Jón Arason started his Armed Revolt supported by the Germans. He proclaimed the whole of Iceland as Catholic. Jón Arason lost a key battle at Sauðafell at the Valleys, Western Iceland and was taken prisoner along with his two sons. They were beheaded at the Skálholt bishopric in the South. The following year, an armed militia moved to Southern Iceland and killed all the Danes they got their hands on—almost 20 men, as well as the king’s Ombudsman, an Icelander. Dr. Ásgeir puts this into context with the European politics of the time.
