Yes, I am jealous of Iceland. You see, they are facing their reality, and, while unpleasant, at least they are getting on with the necessary adjustments. Iceland, a tiny island nation with 315k souls, managed to rack up a stunning $100 billion in banking liabilities (half of which was external) that dwarfed its gross domestic product of approximately $14 billion. Well, not everyone in the country caused it; it turns out that about 50 people were involved in racking up those debts while everybody else was looking the other way.
The defining characteristic of something that is unsustainable is that it will someday stop. Without being an economic genius or delving too deeply into brain-splitting economic minutiae, we can readily appreciate how such a debt load proved to be unsustainable. One cannot forever increase one’s debts relative to one’s income, which seems to be intuitively obvious to everyone except bankers and conventional economists. So the music stopped playing one fine day in late September of 2008, and the dream was over even more suddenly than it began.
What had been an unsustainable accumulation of debt just stopped. Suddenly and irrevocably. One day the story all made perfect sense, and the next day it did not. One day Iceland was the fifth on the global list of per-capita wealth; the next it was headed somewhere lower, although how far it will go is yet to be determined. Such is the way of bubbles.
Loud and noisy demonstrations erupted, the usurious menace of the international banking cartel was soundly rejected by a public referendum, and then the good people of Iceland settled down to the business of figuring out the dimensions of their new economic reality.
I was recently in Iceland, by invitation, to give two talks: one to a group working on creating sustainably systems in the world, and the other, a public talk at the University that was generously funded by a local world-class entrepreneur.
