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You can bankrupt a nation as fast as Iceland detonated. Iceland went illiquid instantly and is now broke, as a nation. They have 4 to 5 weeks of food left. Thier currency is now not accepted, they must pay in Euros. They are rationing Euros to get food shipped in. Suppliers will not extend them credit, they have to pay in advance. Last time I looked, Iceland is a big pile of Ice on top of volcanoes, not much in the way of making money other than cod fishing. They are in deep deep shit.



Well put Aricoh.

Iceland had a boom going on its little ice island called the huge commodities boom. They were quickly becoming one of the largest exporters and refiners of aluminum in the entire world. When the boom ended, however (see the demise of growth in China, India, and other emerging market countries), so to it went their #1 inflow of capital.

As Arioch mentioned, Icelandic banks took this newfound wealth and made investments and issued global debt to keep expanding its Aluminum foundries and other projects. Once the liquidity crunch hit the world, UK depositors (the largest group of depositors in these Iceland banks) changed all of their assets back into Sterling and pulled from these banks...as such, the banks capital ratios plummeted and the banks had to turn to Russia for credit. You know the world is a steaming pile of dogshit if Iceland cannot turn to one of the 31 NATO countries for a loan and has to go the Russians.

Europe is a tricky beast. They have to monitor the financial health of all the Euroland countries, but the problem is they are all different. Spain and UK have housing issues. Germany is gripped with a slowing GDP and subprime US exposure. France's technology boom is long over, but the Scandanavian countries are swimming with capital and a booming economy...how can you regulate them all when they are all so different....

quite the pickle. That is why you often see all the Fed's moving in concert with each other....