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Iceland goes bankrupt

Posted by: Michael Mandel on October 10

That’s an amazing sentence: Iceland goes bankrupt. But that’s exactly what happened yesterday (see BW piece here. See NY Times piece here). That’s a clear sign that the global financial crisis is entering a new and vastly more dangerous phase, where we are paying the price of the lack of a global financial regulator and global central bank.

What ‘bankrupt’ means is just that: The country cannot pay back its external debts, and the Icelandic currency, the krona, has become essentially valueless in the rest of the world. That means the country can no longer pay for imports.

The Icelandic problems have nothing to do directly with American real estate. As Kerry Capell of BW writes:

With the privatization of the banking sector, completed in 2000, Iceland’s banks used substantial wholesale funding to finance their entry into the local mortgage market and acquire foreign financial firms, mainly in Britain and Scandinavia…In just five years, the banks went from being almost entirely domestic lenders to becoming major international financial intermediaries. In 2000, says Richard Portes, a professor of economics at London Business School, two-thirds of their financing came from domestic sources and one-third from abroad. More recently—until the crisis hit—that ratio was reversed. But as wholesale funding markets seized up, Iceland’s banks started to collapse under a mountain of foreign debt.

What’s worse, with Iceland sitting outside the major currency trading blocs, there may be no one with the incentive or ability to save it. The country is looking for loans from the IMF and from Russia. But the United Kingdom is actually threatening to sue Iceland to get back money.

Where does the crisis go next? Most exposed are countries with large amounts of external debt relative to the size of their economy. A quick calculation suggests that by this measure, the U.S. is relatively well off, with external debt about equal to GDP. Japan’s external debt is about 40-50% of GDP, as is Canada’s (these numbers may change as I refine my calculations). Italy is at about 100%, and Germany and France are in the 140-150% range.

From this perspective, the U.S.—with its external debt mostly in dollars—looks like a bastion of stability. The euro zone has some weaknesses—Belgium and the Netherlands have uncomfortably high debt levels, and Ireland is extremely high. But there is a political framework in place which should allow political leaders to take effective action if they want.

The biggest dangers are for the UK and Switzerland. These countries, although much bigger than Iceland, are major financial intermediaries with big external debts. What’s more, they are outside the major currency blocs, with debt denominated in foreign currencies. That means if their currency starts to devalue, their debts will become more and more onerous.

And now we are in very tricky waters, which are looking uncomfortably like the Great Depression. The major players are the U.S., the Eurozone, Japan, and China. The question is: Will they act collectively, or will they engage beggar-thy neighbor policies?

More later on this.

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Reader Comments

Teoh Yi Chie

October 10, 2008 04:24 AM

Your second paragraph is the scariest thing I've read in Businessweek for ever since I started reading Businessweek.

Tim Marshall

October 10, 2008 06:17 AM

Hi - the UK has now used anti - terror laws to freeze Icelands assests. But, I'm no economist - are the Icelandic debts big enough to seriously make waves in an economy as big as the UK's relative to all the other stuff that's going on?


October 10, 2008 07:54 AM

In a globalised economy, what does it mean when a nation goes bust? Given that it seems Hungary is close to a similar situation, is there some possibility of a domino or momenum effect as vulnerable nations succumb? What does that mean in terms of globalisation - the end or the ultimate triumph?


October 10, 2008 08:06 AM

There seems to be a lot of discussion about the drop in equities being a result of hedge funds being forced to sell out as their credit evaporates and organisations being forced to sell assets to meet obligations for derivatives.

Would a better legislative solution would involve freezing activities of hedge funds and organisations involved in derivatives trades, rather than providing fuel for the market distortions caused by these activities.


October 10, 2008 08:23 AM

Last post before bed. The question that still bothers me is, is the "problem" in terms of the drop in equity values, a symptom of the "weapons of mass destruction" (derivatives) going bad and forcing the "real economy" to stump up for the "notional" losses in derivatives? Is the threat to the the "real" economy a result of a failure to recognise that the shadow banking system got massively distorted. If that is the case then I reckon that action should just centre on shutting down the deriviatives market.


October 10, 2008 01:25 PM

What a great question: "Will they act collectively, or will they engage beggar-thy neighbor policies?"

It is some consolation that apparently Iceland has sufficient natural resources for people to survive outside the global system. It is not true for every nation, and therein lies the rub.

Any appearance of bankers and politicians consciously choosing winners and loosers is likely to be unpalatable to most, yet leaving people's fate to a capricious market that they can't control seems patently unfair. These times could truly turn out to be world-changing. I would not be too worried except for the fact that critical decisions may be made in great haste, and those who have already thought it through may be able to push an agenda that is not necessarily in the best interests of the majority of people.

In the meantime, I wish that T. Boone Pickens would stop trying to seduce us into burning up not-all-that-plentiful U.S. natural gas in cars. I wanted to save it for future generations to have a chance to keep warm.


October 10, 2008 01:34 PM

Isn't OPEC also a signficant player? Likewise, Russia holds a lot of energy cards that remain quite important to Europe, so currency matters.


October 10, 2008 03:53 PM

What’s happening in Iceland is sad and is also a “wake up call” for other countries whose debts outweigh their GDP’s. The UK should be especially worried. Last time I checked they were one of the main importers of goods in Western Europe. Unfortunately for them they tend to borrow in various currencies. Their debt balances will almost certainly increase as the pound weakens against foreign currencies due to the UK lending money out in order to sure up their domestic financial institutions. I bet the UK will soon regret the fact they didn’t adopt the Euro as their primary currency as this financial crisis gets worse.

Mike Mandel

October 10, 2008 04:19 PM


I was thinking the same thing about the UK.


There are real economy effects, because we invested in consumer goods production, for which the demand will no longer be there.


October 10, 2008 09:17 PM

The situation in Iceland is unbelievable, we´re experiencing the biggest trauma in the history of our democracy. The Icelandic Nation is of course not to blame, and it´s incredibly sad to see our British "friends" act the way they´re acting. Anti-terrorist laws for crying out loud!! Is he insane??!! Iceland is known for it´s peaceloving manner and the UK shouldn´t try to hide their own economic troubles behind little Iceland. That´s just evil. Of course we will pay back what the banks couldn´t pay, we have never been known for anything else than reliability and honesty! We do have serious difficulties, but we will prevail. We are a proud, honest and hardworking nation.

Brandon W

October 10, 2008 11:24 PM

I told you weeks ago to start your book on the second Great Depression.


October 11, 2008 12:16 AM

Another article from a competitor suggested that a depression-like scenario would lead to deflation, Since anything you own will be worth less, the author suggests renting or leasing, rather than buying. This author presumes that the dollar will hold value during a period of massive deflation. Yet, we see the conundrum Iceland faces - the Krona has no value. How can we have massive deflation, while holding a strong currency. What conditions would make this possible?

albert francesca

October 11, 2008 01:38 AM

i believe that we are heading for a one world, monetary and Political with one world leader.
the bible has many answers to the times we live in

James N

October 11, 2008 03:26 AM

interesting article on Iceland bankruptcy and countries with potential problems because of too much external debts.


October 11, 2008 04:41 AM

Thank you for the best information

Funny Money - Worthless

October 11, 2008 06:19 AM

That's what happens with no real regulation, no oversight and Congress out to lunch.

Derivatives, subordinated debentures, swaps, short selling, etc. all schemes by Corporate and Robber-Barons to get rich using untraceable bundled "funny money," at the expense of tax-payer bail-outs.

Stick to cash, stock, bonds and notes. All other "bundled" hard to trace instruments should be banned immediately.


October 11, 2008 09:49 AM

The market is still in extreme panic condition (VIX index to a new high) + rising foreclosures (107 500 homes lost in September. Link: + rising bankruptcies ( up 93% VS August 2007. Link:

It's too early to call 8000 is a bottom... since this seems just the beginning of financial tsunami (1st wave)... I will say the market will drop more to 4000 before it can find a bottom.

Similary in Japan, bankruptcies suddenly up 34% vs last year since the financial tsunami. Link:

foreclosures soared to a record level as well...

Joe Roberts

October 11, 2008 10:49 AM

a serious world leader with an understanding of economics needs to address these issues. He must command respect, and be decisive in his tactics.
In the U.S., we have no such leader in either party. We have settled for slogans.

Joe Roberts

October 11, 2008 10:50 AM

A serious world leader with an understanding of economics needs to address these issues. He must command respect, and be decisive in his tactics.
In the U.S., we have no such leader in either party. We have settled for slogans.


October 11, 2008 11:10 AM

In the words of the legendary Peter Lynch. "If you spend two minutes a year thinking about the economy it is one minute and a half too much."


October 11, 2008 02:03 PM

I'd rather be in financial crisis than be using the Euro.


October 11, 2008 02:58 PM

Another Milotn Friedman casualty. From Milton's wikipedia page : "Friedman made a great impact on a group of young intellectuals in the Independence Party, including Davíð Oddsson who became Prime Minister in 1991 and began a radical program of monetary and fiscal stabilization, privatization, tax rate reduction (e.g., lowering the corporate income tax rate from 45% to 18%), definition of exclusive use rights in fisheries, abolition of various government funds for aiding unprofitable enterprises and liberalization of currency transfers and capital markets."

So how's that Friedan medicine working out for you, Iceland?

Joe Cushing

October 12, 2008 09:23 AM


I don't want to hear any more of this depression talk from you unless you can tell me that you have put a significant portion (more than half) of your portfolio in puts and shorts. If you believe it, you will put your money where your mouth is. The fact is, nobody knows where the markets for anything are going tomorrow. It's a coin toss. If half the people are predicting recovery and half the people are predicting depression, half the people will be right. That doesn't mean they had any basis for their prediction.


October 12, 2008 11:26 AM

The stock market is also a voting machine, and it appears the investors continue to speak. Folks are locking in losses even after a 40% slump. The 1982 to 1997 trend line for the DOW puts its fair value at 7000. The diversion from this trend line was caused by leverage - borrowed money. Perhaps that is where much of the money from the "housing boom" was placed? Perhaps banks are calling in those "investments" now? Banks will lend when the DOW goes below 7000. By then, they will have recovered part of their money from the largest public piggy bank in the world - the stock market.


October 12, 2008 02:27 PM

Let's look at the economy of the United States (Ref. Wikipedia). GDP $13.81 Trillion (2007). Net worth: $59 Trillion. Debt & Liability $72 Trillion. (2007). US derivative market $170 Trillion. Gross liabilities to foreigners $16.3 Trillion (2006). Their value of imports are more than value of exports. North America has shipped its value added jobs overseas.

What is going to happen when Japan, China and the Middle East call their notes in? How would you like to be holding T Bills that are worth less through more money being printed and watching your return on interest rate fall.

The world derivative market is $500 plus trillion. This market works on forwards, futures, swaps and options. The futures seem to be the only thing that are guaranteed against default, standardized and settled on a daily basis. With the other three you might as well be playing at the casino.


October 12, 2008 05:36 PM

The US external debt (government and private sector combined) is three times the US economy.

The households in USA with their Home, Credit card, Auto, Education, and personal loans are highly leveraged owing 3.2 x Annual Gross Pay in debt.

Until the fundamentals of the economy and fiscal responsibilities of the citizens change drastically the future is bleak.

An economy that is fuelld in 70% by consumer shopping (on credit card debt) cannot stand on it sown legs for long.

Mike Mandel

October 12, 2008 07:59 PM


External debt in the U.S> is about equal to GDP right now, which is not great but better than a lot of countries. I do think, though, that consumption growth. will have to slow dramatically


October 12, 2008 10:32 PM


What is the trade position of other advanced countries with an external debt higher than the US??

For example, Italy has a total debt of about 106% of GDP (and most of it is external) but the country has a trade surplus.

Same for Japan....very high debt but very significant trade surplus as well.

In other words, they can "finance" their debt through their trade position.


October 13, 2008 03:46 AM


I forgot,

In my example (Italy and Japan) the household savings are highter that the US (much much higher in the case of Japan).
So the external debt figure alone doesn't reveal the whole picture.


October 13, 2008 09:42 AM

This weekend’s global response to the financial crisis was encouraging. Now let’s see these so called financial experts stop preaching and start working together to fix the many plaguing issues. They can start by reprimanding the UK for its comments on Iceland. The fact that they are calling them “Financial Terrorist” and want to sue them is appalling to me. Instead of causing problems and point fingers, they should be working with other countries to help find solutions on shoring up Iceland’s financial system.

Mike Mandel

October 13, 2008 11:04 AM

Japan has much less external debt than the U.S., as a share of GDP.


October 13, 2008 12:58 PM


You are right...sorry for my mistake.
Yes, Japan doesn't have as much external debt as the other advantage for them even if their total debt/GDP ratio is the highest in the developed world (195% in 2008)

Brandon W

October 13, 2008 01:38 PM

I think I'll feel free to have whatever opinions I want to have. Thanks.


October 13, 2008 02:28 PM

Many European nations will get the collapse they so richly deserve.

They are so obsessed with finding every flaw in the US that they utterly failed to see if their own house is in order. It will serve them right that their foolish obsession with anti-Americanism caused them to suffer more than America.

Brandon W is a leftist who is still unhappy that the USSR failed. He uses the word 'Depression' a lot, but fails to distinguish his own psychological/clinical depression from an economic depression.

Note how he will never say what unemployment rate constitutes a depression. Even 6.1% is a 'depression' for this person.


October 13, 2008 04:16 PM

"...the krona has become essentially valueless in the rest of the world. That means they can no longer pay for imports."
If the Icelandic government had any smarts, they would have stocked up on gold reserves a long time ago.


October 13, 2008 07:08 PM


Despite many flaws in the European Union institutions, on average, EU countries have their financial house in order overall compared to the US by a long stretch. The pact of stability imposes an effective straitjacked to excessive budget deficits despite the fact that social spending is significantly higher compared to the United States. Not to mention the fact that the vast majority of them enjoy trade surpluses.
The exception is maybe the UK which followed the folly of excessive consuption and reliance on the financial sector.
I cannot even imagine where the US would be if we did not have the ability to borrow in our own currency (the dollar is still the reserve currency of the world, albeit decreasingly so) like any other country on the planet.
Like De Gaulle once said: "the enormous unfair advantage of the U.S."
I suggest you to do your homework before posting your sub 8th grade gibberish.
You really lower significantly the level of discussion in this blog too often....


October 13, 2008 08:37 PM

Oh my god! They will eat all the poor whales! Whales will become the next victims of the financial crisis.......................


October 14, 2008 05:02 PM


As usual, your beliefs are not supported by a single cite to a credible source, and are therefore false.

The main article (which you are conspicuously trying to avoid) already states that the US is inbette debt shape than France, Germany, etc. You are denying this fact.


October 14, 2008 07:00 PM


Some data for you

National Budget Deficits

Source: Organization for Economic Cooperation and Development (OECD)

Balance of Trade (compare the Euro area with the US)

Trading Ecoomics website, data source: OECD

List of countries ranked by public debt:

List of countries ranked by external debt:

Source: The World Factbook, a central intelligence Agency (CIA) publication

You know....the OECD or the CIA are not credible.....crazy left wing organizations

I always supplied to you the link to the sources to support my arguments, something you always seem to know, I do my you???


Some of these figures will go out of whack due to recent world events

Joe L

October 14, 2008 10:31 PM

As long as the US is buying up banks, why not buy up a small country or two?

If we think out of the box, we may be able to pickup a small country for a reasonable price as a sound long term investment for the next state in the union.

Sounds far fetched? We we used to acquire territory through wars. What if the government approached terriorial expansion from an investment perspective? Iceland's fishing territory and capability, geothermal energy, and strategic location just may make it a sound investment.


October 14, 2008 11:24 PM

I'm not sure if I got this right -- Europe just acted collectively and did a small beggar-thy-neighbor, essentially causing the U.S. government to choose the path that is might likely to save the taxpayer some money.


October 15, 2008 10:56 AM


You are quite right

Albeit not exactly in an unified way at the beginning, Europe kinda of showed the way to the US for this crisis (direct injection of capital in banks)
Remain to be seen if this will at least alleviate the crisis

Joe L

In the past, territories were acquired through outright purchase too not only wars. The French Louisiana and Alaska are good examples.
The Louisiana purchase is historically considered one of the best investment of all time!!


October 15, 2008 01:03 PM

Well, it is hard not be a bit rejoicing in Iceland's and Britain's financial meltdowns. These two countries have shown an enormous cockiness to the rest of the world overspending with money that rightly belonged to someone else. I guess it is not so fun anymore - the party is over and their citizens will have a well deserved long-lasting hangover.


October 16, 2008 04:08 PM


You did not answer the simple question. Let me restate it using smaller words.

Michael Mandel's article at the top states that the US has less debt IN RELATION TO GDP than France and Germany. Your sources do not disprove this. So why are you bitterly clinging to that myth?

You don't appear to comprehend the difference between absolute debt. vs. debt in relation to GDP. The US has a larger economy than Japan or Canada.

Again, the 'percentage of GDP' concept is one you should strive to grasp...


October 17, 2008 12:40 PM


You should read better what I posted.
All of my links report percentages relative to the country GDP (except public debt).

I argued that the major European economies have smaller budget deficits (% relative to their GDP) compared to the United States (link #1 in my post)

The trade position of the Euro area is WAY better than the US (GDP is very close in size betweent the 2). You can see the report generated clicking link #2.

Public debt among large advanced economies as percentage of the GDP is significantly worse than the US only in Japan and Italy (link #3).
Both have a better trade position than the US (expecially Japan) and Italy has a smaller budget deficit.

External debt: The only major advanced economies that go over 100% of GDP are UK, France and Germany (link #4)
Germany has a significant trade surplus.
France recently experienced a trade deficit, significantly smaller as % of GDP, compared to the US and its budget deficit is smaller (the EU stability pact imposes a ceiling of 3% of GDP).

Even Belgium, Switzerland and the Netherlands, mentioned in the main post as having major external debts, (well over 100% of their GDP) experience major trade surpluses.
The Netherlands and Switzerland have budget surpluses, Belgium has a budget deficit of 1.3% of GDP

General Government Balance report for the 3 countries (source: International Monetary Fund)

List of countries ranked by Current Account Balance (source The World Factbook)
Look at the values for France, Germany, Italy, The Netherlands, Belgium and Switzerland.

List of countries ranked by GDP (nominal)
Source: The World Factbook

The point I was trying to make (and that you sorely missed) is that the debt position doesn't tell the whole story.
A country with a trade surplus, a smaller budget deficit (or a surplus) and higher national savings (all the above mentioned countries have significant higher saving rates as % of GDP than the US, just check the IMF website can manage its debt position much better than a country that consumes more than what it produces and saves almost nothing.
And yes, UK is in must be that "special relationship".....
That's all.

Mike Mandel

October 17, 2008 04:30 PM

All this discussion is interesting. What I think we are learning is that the size of the external debt and the size of the trade surplus/deficit reflect essentially different problems. It's possible for a country with a big international finance sector to build up external debt which is large relative to the size of the country. If the liabilities and assets are mismatched (in currency or duration, or if the liabilities are held by the private sector and the assets are held by the public sector), the country may still face potential financial pressures, even if it runs a surplus. Korea seems to be an issue in that sense.


October 17, 2008 07:07 PM


South Korea GDP is about 1.2 trillion

Public debt is 28.2 % of GDP

External debt is 220 billion

It has a trade surplus (export for 379 billion) and a positive current account balance for 3.7 billion

It ranks at 6th place for reserves of foreign exchange and gold


October 20, 2008 10:06 AM

Great point Dominic, I think another factor that needs to be addressed is the currency in which the debt positions are held in. All of the US’s debt is in dollars. We inherently don’t have to worry about our debt balances increasing as the dollars price fluctuates. However some European countries, including Iceland and the UK, hold their debt in foreign currencies. As their currencies weaken due to inflation, their debt balances will increase. Euro currency participating countries such as Germany, the Netherlands and France should be in a healthy position although they have high debt ratio’s compared to their GDP’s. They tend to keep their debt positions in Euros as opposed to other foreign currencies.


October 20, 2008 02:27 PM


The US can just print up more money to pay off its debt if the debt holder put up with the resulting currency devaluation.
As I mention in my previous post, it is "the enormous unfair advantage of the U.S." which De Gaulle already denounced in the '60s.
I think Europe and the BRIC countries will and should demand the end of the role of the US dollar as reserve currency as part of the already proposed restructuring of the global financial system.
We will se what happen...


October 22, 2008 03:31 PM

How about countries in asia and south america?

Objective Scrutator

October 23, 2008 06:56 PM

If you Icelandic morons hadn't switched to social democracy, you wouldn't be so screwed. Now, thanks to the establishment of a worthless system that stifles GDP, you're bankrupt. You need to stick to supply side economics like the rest of the world. If you are willing to do this, we'll take you under our wing, and we can crush the Leftist British together.

Payday Loan Advocate

October 27, 2008 05:57 AM

Global financial turmoil is the biggest problem encounters of America and Europe. Americans are struggling with the current economic crisis that has been brought on by careless mortgage lending. However, America is not the only country that is negatively affected by this economic calamity. The International Herald Tribune tells its readers that the credit crunch is being felt in Europe, too. Small businesses like Dominique Boudier’s printing company, outside of Paris, rely on credit with their suppliers to operate. Boudier’s creditors are reducing their offerings by half. This cut has been mandated by the suppliers’ credit insurance companies. Considering the 60-day lag time in which clients pay, Boudier’s business needs additional cash flow to compensate for this major shortfall. Because Boudier’s bank has its hands tied as well, Boudier fears the worst. Boudier’s bank, like many others throughout Europe, started to put its money to sleep with the European Central Bank instead of investing it in other banks and the economy as a whole. When banks began to fail and liquidity was disrupted, credit began to dry up. Similar to America’s Federal Reserve Bank, the European Central Bank uses a mechanism based on the ability to produce as much fiat money as necessary. Fiat-money currency, which is essentially credit money, loses worth as soon as the government declines to further guarantee its value. Inflation is on the rise. Many people believe that stronger private banking systems that make responsible decisions will eventually solve this problem. In the meantime, payday advance loans will be easier to get for those that need short-term assistance and can’t afford to wait for the faltering central banking system.
Post Courtesy of Personal Money Store
Professional Blogging Team
Feed Back: 1-866-641-3406


November 15, 2008 09:48 PM

Part of your article was taken directly out of another story (which you did at least mention, I'll give you that). Taking another author's words without quote marks is plagiarism.

Mike Mandel

November 16, 2008 10:45 AM

Andrew--which part of my article are you talking about? I went back and looked, and see no overlap. (The bankruptcy word was first used by Iceland's prime minister)


November 21, 2008 02:36 PM

"That’s a clear sign that the global financial crisis is entering a new and vastly more dangerous phase, where we are paying the price of the lack of a global financial regulator and global central bank."
What planet are you from? It is exactly the fraudulent fiat currency system managed by the central banking scam and all its fraudulent derivatives markets that got the world in the mess it is in.
And you want more central banking power.


November 21, 2008 05:57 PM

This magazine writes useing a sixth grade reading level...jesus christ. This magazine is a propaganda mouthpiece for the international bankers. The following line, "where we are paying the price of the lack of a global financial regulator and global central bank." is evidence of that. Please don't be fooled. The international bankers have created the financial crisis, and they are going to offer their solution, a "global financial regular and world bank". If you go along with the establishment of what the G20 Summit is trying to set up then your prodigeny's future is doomed. The elite is only interested in destroying the middle class--not helping it. God, don't be fooled.


November 25, 2008 02:29 PM

With a fiat reserve currency, you cannot escape the trap. Government will ALWAYS attempt to print their way out of problems. You HAVE to take the printing press away from these idiots.

For those who can read -- this is the exact story of the beginning of America, warts and all, by Roger Sherman. From Wikipedia - He was the only person to sign all four great state papers of the U.S.: the Articles of Association, the Declaration of Independence, the Articles of Confederation and the Constitution... Thomas Jefferson once said of him: "That is Mr. Sherman of Connecticut, a man who has never said a foolish thing in his life."

Read his short little book -- you will see why we must END THE FED (
A Caveat Against Injustice or an Inquiry into the Evils of a Fluctuating Medium of Exchange by Roger Sherman (Now THAT'S A TELLING TITLE, ISN'T IT!?)

In addition read the first 4 paragraphs of this treatise by one of the great American authors, George Bancroft. It states EXACTLY what will happen if we allow a central bank into our country (which has happened). The only solution is to get rid of them!


November 25, 2008 09:17 PM

Years ago I worked for Bell Labs, where there was a policy (before the break up) of allowing various entities to work independently, and apparently missing out on some synergistic opportunities. However, there was a prevailing wisdom that large systems that are too tightly coupled were susceptible to catastrophic failures, much like a inflexible metal structure, or an athlete wound too tight.


December 2, 2008 02:02 PM

``In the U.S., we have no such leader in either party.''

We do have such leaders in the US. One is Ron Paul who called this whole mess down to the tee. And if you didn't know (and you probably don't) he was running for President under the Republican ticket. Unfortunately, McCain was selected to loose against Obama. If Paul would have been selected by the party machinery, he would have beat the pants off of Obama.

This problem has nothing to do with economic mubo-jumbo and business cycles. This is a concerted effort by globalist bankers and the oligarchy that runs them to re-order the system according to their design. Of course, the masses have to be subjected to horrors in order for them to accept their solutions for us. That being perpetual slavery via taxation. Their tools in these efforts are the fiat, fractional reserve money systems set up all around the world. At the apex of this system is the unconstitutional and fraudulent Federal Reserve System of the United States.

Homework, please to youtube and search for Ron Paul and hear what he has to say on the matter.


December 5, 2008 09:11 PM

In light of the question you posed, here is an interesting headline from the U.K. Telegraph yesterday: "1930s beggar-thy-neighbour fears as China devalues".

The article points out that China is already experiencing civil unrest in some regions, but it has the world's biggest trade surplus.


December 7, 2008 01:02 PM

What bankrupt? It's basically a transfer of mass wealth from the people to the elite.

Study this site.


December 9, 2008 01:11 PM

I'm a retired Brit so you can imagine how much fun life is at the moment. Our Gov. tells us we are in this mess because we have borrowed and spent more than we can afford; OK, can any one explain the logic of our Gov. borrowing to give Tax breaks to encourage us to spend. It seems to me this is more of the same**!!** that got us into this mess!


December 22, 2008 01:47 PM

It come to my attention that everything happening to finical markets across the world are the result of greedy weak cowards who fear the working class (cause the need us more then we need them) cause they know want alot of us don't and thats that we are the true keepers world, its hardworking people are the ones that make the world turn.

These international Bankers are like dogs and they are starting to go rabbit and where I'm from you put down a rabbit dog and as primitive as it may seem the only way to truly save the world is kill publicly hang those bastards and anyone affiliated (this means corrupt world leaders and investment bankers) Then we must create a monetary system that is fair to everyone if we truly want finical freedom.


January 3, 2009 10:36 PM

Wake up people! Nestor called it. The U.S. federal reserve system has been doing this to countries for a century now. Giving loans with interest to countries with great resources that can't pay back these loans resulting in foreclosures and bankruptcy. Another words, wealth transfer from the individuals of the country back to the banks. This enriches all the shareholders of the banks, and its designed that way. Did you ever stop and question why with all the abundance in the world there are so many impoverished people, and the wealth gap between the rich and the poor continues to grow?


January 12, 2009 04:59 PM

Can the Icelandic gov't make some arrangement with Icelandic Airlines to bring in visitors cheaply? That would be a great source of extra bucks - seems like a no brainer.


January 26, 2009 08:26 PM

Ukraine (also USSR) suffered economic collapse in the 90's. Saddly, evolution created a solution, half the young grils turned into global sex workers to support their families. By analogy this may occur in Iceland, where it's new export is genetic white skin for the highest price on the global market. That why guilt banker need to be punished.


January 26, 2009 11:02 PM

Calm down everyone. New Zealand went completely bust twenty years ago and look where it is now. Big financial mistakes have been made but we've been through a Great Depression to know we don't want to go through that again.

Chanse D

January 29, 2009 02:49 PM

Iceland is a country? I thought it only existed in greek mythology.


January 29, 2009 03:26 PM

Jim that does sound like a really good idea but they would definitely have to clean up the riots and such before people would want to visit!


January 29, 2009 04:17 PM

It's interesting to see conservatives expounding their oversimplifications to the world's problems even over here - on this subject. As the world's leading social scientists pointed out after being hired by DHS to inform the US government about who was most likely to either support violence as a solution to a given problem, or to actually use it in response to anything they believe threatens their traditions, it is RWA(authoritarians) and right-wing conservatives (SDO's or social-dominance oriented) that follow them around who are /overwhelmingly/ the source of, not only terrorism, but of many other aggravations of social ills around the world. What does this have to do with economics? Everything.

Here we see them reducing the complexities of economics down to a matter of "leftists" and "socialism". This is perfectly in keeping with their solution to litteraly *everything*. Why do they do this? Because it's easier for "integratively simple" (a euphamism for the more insulting "simple-minded") people to think in terms of a 'black and white' world where they are good, "they" are evil, wrong, bad, and a threat to their way of concieving a just world..."justice" being whatever they themselves choose to do ... of course. And because the US fought a Cold War recently they must logically conclude that the socialism "they" used must be evil as well, and thus the wrong way to solve any problem. Milton Friedman comes along and gives them a gift in an oversimplified concept of economics, or the idea that unregulated capitalism is the perfect solution to the economy, not because it's a well thought out sytem of doing things. No, no. Quite the opposite in fact. They grabbed and held onto this idea so tightly because it is the simplest way of grasping the ambiguities of the economic market place. Regulations are seen by them (albeit unconsciously) as cognitively complicating the matter. Complexity and ambiquity is repellant to the conservative due their simple-minded way of concieving the world.
(see DHS counter-terror research here)


February 1, 2009 07:36 PM

I am from Serbia. During the ninties we had a mega inflation and our wages were reduced to 50 cents of a Euro roughly do not ask as how we survived, but try reading our economic history how we got out of the crisis. The key is in the food and water and there will be the exit of the crisis.


February 3, 2009 11:40 AM

I'm confused. Why do countries even take on debt?

As private citizen I have NEVER had debt. Ever. If I can't finance something by my labour then I will not buy it. Why can't countries take this approach?
People keep mentioning there being some benefit to being in debt, but look at the world now...

Aren't the people who sold Icelands citizens into slavery through debt is it's politicians who put the country in debt in the first place? They'll just skip the boat and the population will be left holding the bill.

I guess I'm oversimplyfying it unrealistically, as some econ major soon will tell me. I don't know. I do believe people have agendas though and few of them seems to be to benefit the mass of people.

Seems to me that Iceland would be okay if they had invested in a precious metal reserve instead of debt?


February 3, 2009 09:12 PM

You need money to feed and house yourself, so technically you can't say that you are not in debt. We are all in debt, unless of course you are a banker. Since no currencies are backed by a precious metal anymore, money can only come into circulation through loans. If everyone in society were debt free there would be zero dollars in existence. Once you understand this backwards concept, you will see that the world is being taken over by a small group of elite bankers that control and manipulate currency. They are the true masters that, in fact, enslave societies not by the sword, but by using debt. So Swede, though you are not an economist, you are correct about the people of Iceland being stuck with the bill. Why does this happen? Corrupt politicians sell out their countries to these bankers. There is a really good free movie online that explains all of this mess and the agenda behind it. Go to and watch the first 20 minutes of the newest release. This video is a true wake up call to how the financial system operates.

Tom Martin

February 6, 2009 04:54 PM

The scariest part of this report is the end of the first paragraph. Actually we are in this economic mess because of fool faith and trust in a powerful central regulatory agency, The US government. Making a bigger bureaucracy will further alienate accountability from the common man – act locally.

Greedily the US government politicians guaranteed backing of trillions in loans that should have only been backed by the properties the loans were made on thus driving loan prices up and encouraging highly leveraged markets to evolve.

Free markets have no mechanism to force losses (Bail outs) of one group onto others who did not voluntarily enter the agreement, governments create such systems where people who only have risk and nothing to gain, people such as tax payers.

We already have a stable global standard, gold. An economic virtue of gold is its use curtails inflation driven government policies, naturally government controller’s distain gold.

Dan Muston

March 2, 2009 01:51 PM


I'm really worried about my money tied up in bonds in ireland. what happens if the country is declared bankrupt, and how likely is this of happening.

Please advise me whats best.


March 12, 2009 02:57 AM

a great conversation


March 31, 2009 10:47 PM

one world monetary, one leader.........

Jason Seoul

September 19, 2009 01:52 PM

I think Iceland got fooled into the sub prime market and paid for it.

Jason Seoul


October 19, 2009 06:58 PM

This is the scariest part:

¨where we are paying the price of the lack of a global financial regulator and global central bank¨


October 23, 2009 02:13 PM

This is much later than the article was posted, but this entire premise is null now. Here in America, our debt outweighs the total GDP by 200%. We have over 11 trillion dollars owed, the US Dollar has been removed as the OPEC reserve currency, and fewer and fewer nations are purchasing our treasury bills (T-Notes). That all spells the same thing for America. We no longer produce anything other than green paper with numbers on it. Prepare for the fan to get smelly folks!

If you own paper money, 401k, IRA, Roth etc... sell out and get your hands on physical gold and silver bullion. If you don't you won't be able to afford or buy anything in 4 years.

Pete Emerson

December 14, 2009 09:16 AM

Just one rather embarrassing problem with your article. Iceland didn't actually go bankrupt, i.e. it never defaulted on its sovereign debt. That's just a persistent, but incorrect, rumor.


January 6, 2010 07:59 PM

Bring out the icelandic princesses. hubba Hubba. I will go there to spend money.


January 8, 2010 08:11 PM

So now I hear the people of Iceland are in revolt and refuse to pay back the debt that has been loaded on them by their govt and inexperienced fishermen turned finacial investers. Argentina is heading the same way.

Thor A. Sapp

January 10, 2010 10:16 AM

Pay them with dollars, fuck their daughters! :-)

Freedomfighter/V if you want?

February 10, 2010 03:50 AM

First I want to say that this is something that was destined to happen. Living life on a promise put on paper is just that a promise. Promises are kept but only for so long. Things you own end up owning you. Iceland should look into scientist and technological engineers and forget about the money system they are in a perfect situation for this. They need to become self sustained the technology is out there they just need to figure out how to do it and work together. Money is not the problem its finding an alternative to it that is the problem and believe me there are alternatives. Right now there are no governments there is no west east there business and as a world of business then we should look into improving it iceland need to do just this. Zeitgeist movement for life and venus project advocate for life. If you folks do not know of this look into it technology is being suppressed companies are lying to us keep your head up poor people of the world if philosophy is right armagadden is on its way and life will change for the bad then the good. love peace imagine.

matthew conelly

February 11, 2010 02:01 PM

thats ok


April 12, 2010 09:46 AM

"...the Icelandic currency, the krona, has become essentially valueless in the rest of the world. That means the country can no longer pay for imports."

and remember that, iceland being iceland, almost everything is imported.


April 20, 2010 05:03 PM

what a fucking bullshit amount of lies
Iceland never went bankrupt

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