It had to happen. Iceland couldn’t be the only government to ‘go under’ during this financial crisis.
This is one of the problems with a global recession, it is very hard to guess what is actually at risk. It could be everything, or it could be nothing.
Either way, the impact of too much borrowed money is clear for all to see. First the Icelandic banks over borrowed their entire economy - and that takes real talent! - and not the Americas are hit.
This CNN.com story details what is actually happening and the actually small scale of the problem, relatively speaking. US and UK banks and financial firms are losing tens of billions of dollars and pounds, whilst the Puerto Rican deficit is only around $3 billion.
Ok, so $3 billion is still $3 billion - but it isn’t on the same scale as some hedge funds!
Will someone charge in to help them out? It will be interesting to see who wants to buy a strategic stake in another economy for a knock-down price.
But I guess if you want to see smaller government, this is one way of going about it…