Tuesday, January 27, 2009

Iceland officially gives up the ghost.

If you want a glimpse of what could (note I said COULD) happen to America, check out Iceland, or what is left of it.

Late last year, Iceland pretty much confessed that it was completely bankrupt and its financial system was insolvent. First, the local banks were nationalized. Then Iceland's stock market collapsed. Next they froze their currency rate. As a result, almost every other nation stopped trading / exchanging the Icelandic króna. Finally the locals (all 300,000 of them!) refused to do business with their "new bank." They took out everything they could, and put their money in other national banks. Leaving a complete vacuum in their wake. Eventually, the country had nothing left.

Flash forward to the present, and today the government of Iceland has abandoned ship. A new new government will have to be formed. They have to rely on the International Monetary Fund for a "loan" to get them through their new meager existence. And eventually the assets of the entire country will have to be re-evaluated and used as collateral for a re-fi on the whole nation. In the end, all the citizens will bear the load. The debt will linger for decades, or more, to come.

So. In less than a generation, Iceland has gone from one of the wealthiest countries in Europe to a nation of paupers dependent upon handouts.

To recap: Iceland bank were nationalized. (Sound familiar?) Their stock market collapsed. (Sound familiar?) And then there was a run on the banks. (Hrmmm....) Finally resulting in an abandonment of their government (One can hope...)

Could it happen here? Probably not. But a year ago, the Icelanders thought it was impossible, too.

And we certainly seem to be sliding down a similar slippery slope.
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