The small country of Iceland has become headline news on a global scale. Nationalizing Glitnir, Landsbanki and Kaupthing shows what a struggle the tiny island is going through. Simultaneously, there seems to be much ado about wether Iceland nationalizing a bank provides the same security as England doing the same. The prime minister has even threatened the press with national bankruptcy.
The British investors have understandably got cold feet, and would be performing a bank run if the Icelandic culprits would be any closer. Now they have been subjected to complaining on BBC News and on the Q&A of the Financial Times about their frozen accounts. With the currency sinking faster than its cod fishing industry, the 15% interest rates don't seem so appealing any longer. How did investors not realize that such a phenomenal interest rate is bound to carry risk?
Today, the Iceland has resorted to suspending trading citing "unusual market conditions" - indeed true when the country is being threatened by a law suit from England over British savings. Wether or not the British where foolish to expect such high interest rates without risk is now irrelevant; the icy grip of excessive leverage is now not only choking the financial sector of the tiny economy, but threatening its very existence. Back to cod-fishing by the looks of things.
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