11/08/2008 05:12 am ET | Updated May 25, 2011

Iceland Is Melting!

So, an entire country is about to go under.

The Great Panic of 2008 was always to some extent global, but no one expected an entire country. Iceland, an island about the size of Ireland right smack in the middle of the North Atlantic, is on the brink of complete collapse.

Iceland hasn't got much of a population, which is understandable. Most of the place is a volcanic wasteland, which is cold much of the year (and has two small ice caps) and that pesky polar cycle of seasons where the sun goes down for only two hours a night in summer and not at all for most of the winter. Since they don't have much in the way of resources besides fish and volcanic heat, the Icelandic government has been selling itself as a tax haven to both the US and the EU. Icelandic banks have branches throughout Europe, and everything was going hunkey dory until last March, when the first rumblings of the current banking crisis were felt over there. Then the current tsunami hit and the two largest banks, Landsbanki and Kaupthing, failed and trading of the six largest financial institutions was halted on the Reykjavik stock exchange. The former was taken over by the government and the latter got a half a billion euro loan, which isn't much, and the Icelandic government is trying to get a loan from Russia, which doesn't seem to really want to give it. The Krone, the national currency, has lost half its value (which isn't much, when I was there a Krone was worth about two cents) and according to the Financial Times, "Iceland could become the first "national bankruptcy" of the global financial crisis.."

But Iceland isn't alone. Thousands of miles to the southwest, a much larger entity, the State of California, is in almost as bad shape. The Schwarzenegger administration has been dealing with the mortgage situation since early summer at least, and has been considering trying to get a handout from the Fed. As California goes so goes the nation...down the tubes.

People have been bitching about why Obama and McCain haven't come up with an actual plan to deal with the situation. The answer is quite simple: Neither has more than a clue as to what the hell they're supposed to do at the moment. This is understandable, as neither does anyone else. The rumors, some of them completely insane, like the abandonment of the Euro,, bailouts by CANADA of the Federal reserve and the like have been spread by some respectable business journalists. One doesn't know whether to laugh or pee in one's pants.

The Canadian elections polls are showing a Conservative meltdown and the situation appears that it's possible Stephiné Dion, whom everybody thought was washed up, might actually win the day and be able to form a government, but an extremely shaky one. Some polls down here show Obama leading by one or two percent, and with the leadership of two of the G8 in such doubt during the middle of a crisis of these proportions can only make things worse.

The Dow Jones fell "only " 189.1 points today. I remember when that was considered a lot.