Banks gone wild – this is the best way to describe the collapse of Iceland’s financial system. It’s hard to pinpoint who’s to blame in one of the freest of the free-market economies.
Is it the Prime Minister? Is it the Althing (parliament)? Government officials who failed to regulate the banking system? Bankers who did not care about their government? People who elected their leaders?
No one wants to accept responsibility.
How dumb was it? Imagine borrowing twelve times the size of your nation’s economy, then defaulting on the commitments.
What are your British and Dutch creditor-neighbors going to do? Nothing.
What’s a viable option for the nation? According to Prime Minister Geir Haarde, the government can declare “national bankruptcy.” Recent history shows Iceland is not the first and it won’t be the last.
A nation’s population turning their backs on commitments only means you’re going to be tagged as ungrateful (the Brits tried to strong arm them, it didn’t work). Paying the national debt, according to the people of Iceland, either requires an early election or a call for a referendum. Government leaders always have an automatic answer. After all, overcoming their woes can be simplified as human history’s most massive shift in monetary and fiscal information using convincingly creative bookkeeping techniques from the three nationalized banks – Landsbanki, Kaupthing, and Glitnir.
However it goes, in the real global economy, that’s nothing but a bunch of guys wearing finely tailored suits negotiating with financial documents.
Iceland is also the first of two nations belonging to the nice part of the list of dumb governments. The nation has a low crime rate, discrimination is virtually non-existent, and poverty is an aberration. Nevertheless, leaders of a population of 300,000 failed to anticipate how global finances can mess with a lot of people. In other words, the dumbness comes from an over-eagerness to provide the best for the population along with laxity to regulate banks. In other words, it’s just economics and not extermination.
In a certain way, it’s not dumb but kind of brilliant when government officials understand the global economy and find a way to consider countries (along with Greece and Latvia), as well as corporations, as too big to fail.
