Iceland

This is going to be brief because I am at work. But this topic interested me a lot.

Iceland's government collapsed yesterday. Hmm. What do people think about that? Apparently in the past decade Iceland has gotten heavily into lending. The Krona (their currency) soared in value and almost everyone quit fishing and went to work for Banks. Fishing had been Iceland's major export for about two hundred years (for obvious reasons) before this whole lending thing happened. Then the European Union called Iceland's bluff. Meaning the EU said "We don't think you can repay all your debts." This caused a run on all of Iceland's banks, and guess what? Iceland's banks COULDN'T meet all their debt requirements.

There is a good lesson here for debtors: don't take out more than you can pay back because someone might call YOUR bluff.

The first thing Iceland did was nationalize all the banks. This was a terrible move because now the debt problem wasn't just the banks who over lent. The problem now became Iceland's goverment's. Whereas if Iceland's government had just let the banks go bankrupt, they could have stepped in and given aid to laid off workers. Making themselves look benevolent. Now the whole f-ing government has gone up in smoke. I realize that any problem that affects a nation's economy is a problem for the nation (and therefore government). But at least had Iceland's government not nationalized the banks, and thus governmentally backed ALL of those bank's debts (most of which belonged to other countries anyway), then right now Iceland might have a government.

There is a good lesson here too: in hard times, people are looking out for number one. They want to survive. Governments should be doing what is best for their people, not what is best to save their credit in the world economy. Because it seems to me that Iceland's government was too worried about their credit rating among other European countries, when they should have been worried about their own people.