How Tiny Iceland Created A Global Financial Bubble, Leaving Wreckage Everywhere When It Popped

A boy charged to the front of an angry crowd here recently and tossed a carton of skyr, a popular local yogurt-like snack, at the Parliament building. It splattered on the rough-hewn stone.

He and thousands of Icelanders were protesting one of the strangest economic failures of the global financial crisis. This past fall, every bank that matters in this tiny nation -- that is, all three of them -- failed. Iceland's currency, the krona, became worthless beyond its shores. The country's financial system stopped working.

Read the whole story here.

Comments

[wagadog]

Oh, now it's ICELAND's fault, is it?

nice try.

[loki]

sure, you have to have a fall guy. someone small that no one knows much about.

[climatebabes]

Iceland was a victim of fraudulent and corrupt rating agencies and the carry trade. The did not initiate the buble. To cast the blame on them is ridiculous and an obvious attempt to distract. Watch

http://www.youtube.com/watch?v=JjglR2KYz5o&feature=related

[Skeetshooter]

This Oddsson fellow is just another Bernie Madoff. He doesn't want Iceland to 'succumb' to the laws of France and Germany. -Or the rest of the world either, it seems. The man is a common unrepentant thief and belongs in jail.

We need to consider implementing a world wide currency. The inherent opportunities for malfeasance in the exchange of currencies is a global black market unto itself.

Fifteen years ago when my father told me he was investing in currency futures, he explained to me how the trading worked. By the time he paused to take a breath, I had figured out a scheme to skim profits. Three years later, lo and behold, the FBI had arrested traders in the pits for delaying buy and sell orders to skim the difference at closing.

I am a high school graduate, and nowhere near as smart as Alan Greenspan, yet I could well imagine CEO's of multinational corporations acting in their short term self interest at the expense of their shareholder's long term interests. Is the world run by a bunch of naive over educated nit wits?

[in4success]

OH COME ON!!!!!!!!!!!!

it was the bushies: wolfowitz and the other crime family GOP fraudsters.

what a f******* joke this is -- ENOUGH!@!!!!!!!!!

[MyTake]

The basic principle followed by international banks and the oil cartel is to limit their risk and exposure on major projects. They form a cartel where 3-4 banks or 3-4 oil corporations take percentages in the major project. Then if that project goes south, the risk is spread over 3-4 organizations. They are injured but not mortally wounded had just one organization assumed all of the risk.

This is why, this global financial crisis is contrived and pre-planned. This NY generated scam was over SOLD big time to all the major banks around the globe. When this toxic crap tanked, it is ensured a major global depression because of the large exposure to it by each bank.

Now the global elite, as defined by The Bilderberg Group, and all that massive volume of money taken out of the system by $150/barrel oil will now come back into play and buy out the middle class properties. In doing so, The Bilderberg globalization plan takes a major step forward where a single global currency issued by private bakers will control the global economy and administer global rule at will.

These scams and this Group needs major street protests. Did I mention that 90% of the Obama administration appointments were culled from the membership ranks of The Council On Foreign Relations, a group fully interlocked with The Bilderberg's!

[KCFreedom]

I have heard that Michelle is a member of the CFR.

[KillTheMessenger]

Oh chucks. Americans were overbidding on cinder boxes they call homes. The US real estate bubble was rising since the 1990s. One day it had to burst. And so it did. Iceland was simply part of the Ponzi scheme called the US real estate market and it wasn't among the winners. End of story.

[bluekatz]

Americans were brainwashed into bigger is better. Higher priced means rich. But they fail to realize that it means nothing if you are paying a monthly mortgage payment.

Many Americans are so gullible and refuse to see the credit based society which has caused this country to collaspe.

[KillTheMessenger]

Exactly. And it's not like people didn't know. Friends of mine were pointing out to me in 1998 that real estate prices were way too high in their area and kept rising astronomically. It's just that a local phenomenon a couple years later spread out like a cancer over the whole nation. None of this is surprising and much of it could have been prevented. But we had to be greedy...

[aweissnet]

Well, at least the citzens of Iceland aren't being forced to go homeless. Like many other European countries, government is kinder to their people.

We will not have this protection, as we continue to go through this free fall. It's going to be every man/woman for himself/herself. It's already started, as people have already lost money in banks that went under, and many are losing homes.

Regardless of the corruption of our financial systems/corporations, it is WE the people who wind up getting screwed. Always. And government turns a blind eye. Actually, worse, rather than helping the people, they continue to aide The Corporation.

[MyTake]

Look, study The Bilderberg Group. It is corporate power that staffs the U.S. administrations and provides them the scripts to follow.

Mass protest The Bilderberg's, protest the government into abolishing The Federal Reserve (the life blood of the international Bilderberg's) and replace the Reserve with a true U.S. Central Bank and all this craps goes away.

[aweissnet]

I've heard of the "money makers," (think that's what it's called. From the little I read here after a quick google search, sounds like it might be one and the same.)

Most people do believe it's a conspiracy theory. This one won't create a fight back until it's almost too late, if not too late. No one will protest. I don't know where these men congregate, who is invited, and who knows about them. I know they don't live on the continential US, so the S hitting the F here won't bother them in the least. People like this really can't be human. People can act inhumane when they're under stress-we see lots of that now. Poverty, terrible conditions, fear brings on violence and irrational action. But these people are not under stress, or living in fear. They are not human in my eyes.

This has bothered me a lot, for quite some time.

[Fabini]

I think all the banks should check their credit scores. Oh wait, that's just a scam of the banks on people. Huh. What if we legislate a credit score for banks? The people controlling the monetary system? I don't know, it sounds too democratic.

[kellygrrrl]

whaaaaat? you want bankers to be held responsible? crazy!
did you see the two-page application for TARP funds? name, address, phone.
Imagine buying a car or house and you filled out that same app.
Of course, Neos say that the economic crisis is the fault of US slobs living beyond our means.

[Fabini]

I've filled out several TARP applications to bail me out from my kid's allowance.

[Fabini]

The comment below was a reply to a different thread. I have no idea why it appeared here.

[KCFreedom]

That's about as realistic to happen as hospitals to be rated for medical errors and bacterial infections.

Great idea, and good point, though.

[Fabini]

In my rural area we have to "hospitals" one a Mac-Mega-Medical Complex and the other a simple country hospital. The small one will be out of business within a year and the Complex will go on , no matter how it would be rated. Sad.

Banks were different up until all the mergers. Remember the community bank? Remember the community banker? They would have high banking scores and be gone from the scene.

[Fabini]

"They" the government, are "we" the people. We must tell them ( and be absolutely willing to follow through) that unless they enact legislation to favor individuals and NOT corporations, we will vote them out of office. It doesn't matter if the politician is an old stalwart, brand new, republican, democrat, or independent, they must pass favorable legislation for people and rewrite legislation favoring corporations.

I think a random drawing of citizen's names would be better than our current legislature.

[strangerinthenight]

There is really no point of that, unless your deposit is over $100,000. FDIC will cover bank deposits under that amount. I would like to see Congress increase that to $200,000. FDIC SHOULD publish it's assest though, to make sure they can indeed guarantee those savings just in case the majority of the banks fails.

No, I don't have "cash" deposit of $100K, so I don't really care.

I favor strict lending, and only those who qualify can borrow, can buy a house, or can buy a car. That should lead to some kind of savings which can be use as collateral for buying a home, car etc. Savings at least 25% of the value the purchase. Same goes for credit cars. Keep the credit scores criteria. Too many bancrupkcies.

I favor free tuitions for higher ed, and re-training for displaced workers.

[Fabini]

Stranger, you miss my not subtle at all irony here. You must be reading from across a crowded room.

[Fabini]

This is a fascinating story. It appears that the saying, "Think Globally, Act Locally" doesn't really apply. Little Iceland was thinking big. I would like to see some follow-up or side articles on banking, so that I understand how it really works. Foolish me, I thought having a savings and checking account at my local bank help my community.

[rabiddog6708]

Global economy.....global meltdown of the economy.......more to come, unfortunately.....Iceland is just the tip of the iceberg.

[marleysghost]

I think Milton Friedman's manifesto of an unregulated market and his naive belief that business men and corporations have the capacity to practice enlightened self interest is the "apple" venture capitalism bit into. This was Economic Darwinism in its rawest form. When greed became good, all the rules of restraint and conservative investment went right out the window in the name of personal enrichment at any cost. And now we look for scapegoats because it is easier than accepting responsibility.

[kellygrrrl]

look no further than Fox News and Dick Cheney to see the results of Milton Friedman's school

[Fabini]

Let us not forget Paul Wolfowitz' tenure as head of the World Bank.

[strangerinthenight]

Interesting reading - Iceland, a small country of 300,000 citizens are the most educated in the world, who enjoyed highest standard of living, is now broke. No surprise there - Just look at Iceland's geography, square miles and 300,000 citizens to handle that kind of booming economy. They privatize and joined the global economy. Then the Wall Street Bust, they were screwed big time.

It's almost the converse of Russia - a huge country, scattered populace and hardly centralized. That size of geography is just not governable. Nationalizing their oil reserves to the complete control of the government, and seizing industries owned by oligarchs. Russia's monetary reserves is still making it less hard for Russians, but it's only a matter of time.

In the meantime, in our country, Banks are failing, industries are closing, growing unemployment, looting of the National Treasury etc, National Debt in time will be unsustainable. With the spent-spent-zero saving generation, credit-card shopt till you drop, you pretty can say, the future is bleak.

One thing is saving for now - we have still have a large tax base - $15-16 trillions for the last 12-15 years. But with growing unemployment and industries closing, the middle class is eroding.

Oh yeah - for us, 27 yo's Generation Y - we're indeed the most leveraged. The Peanut Butter and Jelly Industries may have a brighter future though.

[pahpah25]

BLAME IT ON THE BOOKIES..................THEY HAVE BEEN LEVERAGING BETS SINCE GAMBLING BECAME AN INDUSTRY.............THE VARIOUS BUBBLES ARE SIMPLY THE SAME SYSTEM APPLIED TO WHATEVER..................

[Fabini]

Wrong. Bookies do not leverage bets, they spread them. Completely different. That's why there are no boom and bust cycles in gambling.

[LeonBNJ]

What happend to Iceland is just like many others - they got greedy, ignored long term financial reality, took on too many risks, levereged too much and did so in an absence of sufficent regulation.

[MadamRoma]

I'm blaming this whole blame thing on Charlie Brown, Lucy and their playtime computer. Those two little tarts hacked into the very arteries of the worlds banking industry and undermined the international economy. Who is the prime recipient, well of course that gang of curmudgeons led by a dog with a cause, that had grown tired of working for "PEANUTS". Can someone loan me some money, the palm reading business just took a nose dive.