No one is going so far as to allege that the global markets are besieged by a broad-based movement to violate the law or act contrary to ethical business practice, but it could nonetheless be that the rules are stretched quite a bit, though perhaps within the limits of legality and even ethics. In so doing, companies everywhere are factoring in the value of assets for which there is, at present, no market. To be sure, assessing the market value of assets that are not marketable, either for the short term or for the long term, is a tricky matter. In the vast majority of cases, a market will develop at a later date, and if the companies in question have the wherewithal to hold them until that market develops, there is no reason to harbour any real anxiety. But assets that end up at a fire sale are another matter entirely. So it is difficult to determine market value when the market is sticky and virtually closed. All of these conditions kindle suspicions and undermine faith, and as it seems, the real problem is not so much a growing lack of liquidity as a growing lack of faith. The sooner trust and faith begin to grow again in world markets, the sooner they will rise up from this slump, or recession – at the moment we don’t know which term is more appropriate. Many things are changing, both in Iceland and elsewhere. A new edition of the book “Ten Little Negroes” causes ripples of unrest.
But by now most have realised how unlikely these problems are to disappear so quickly. There is every reason to believe that the coming months could prove difficult as a result, and there is correspondingly little reason to believe that the crisis is past. Uncertainty abounds. A huge investment bank like Merrill Lynch could not foresee that, in only two weeks’ time, it would have to write down billions of dollars’ worth of outstanding debt. The CEO of the company has had to pack his bags and leave, albeit with a generous going-away present. The largest bank in the world is also beset by the restlessness, and it isn’t yet fully clear what the effects will be, but that CEO has received his marching orders as well. And according to the latest reports, while there are reported write-downs of a mere 20 billion dollars on subprime mortgages, the actual amount could in the end be between 250 and 300 billion. BIS Review 131/2007  3  One cannot help but wonder whether market participants in Iceland and elsewhere preferred to suffer through a shaky third quarter in the hope of some redemption in the fourth quarter, and in the process, avoided recording some items that should have appeared in third-quarter accounts.