Iceland: What happens when a country goes bankrupt?
Bob Morris @ Oct 9th 2008 19:15 - Category: Credit crisis Tags: Iceland
Especially when their banks were crazy over-extended in other countries? The government of Iceland has now nationalized all their major banks, their currency is dropping off a cliff, and their stock market has been closed until Monday.
Apparently their banks took a cue from US banks, and went insane on leveraged greed too - but even more excessively. Not a good idea for a tiny country.
How insane did it get there?
In the past five years, people’s average wealth has grown by 45 per cent - and the money has gone into houses and cars, financed by 100 per cent loans based on a spread of foreign currencies. Now the krona is plummeting, loans are ballooning and thousands are defaulting.
Basing the interest rates of car loans on a spread of foreign currencies is howling at the moon madness. Good for coyotes maybe, but not for financial institutions.
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reader on 09 Oct 2008 at 9:53 pm #
What happens when a country goes bankrupt?
We ’bout to find out…