Iceland Found Another Way to Clean Up a Financial Crisis

My understanding of Iceland proved dated and left me ill-prepared for what greeted me upon arrival: a booming economy, one that has been greatly transformed from the depths of the crisis. Growth has topped 4 percent in each of the past three years and the economy is forecast to expand 3.3 percent this year, according to data compiled by Bloomberg. How Iceland recovered from one of the most traumatic shocks experienced by any nation during the financial crisis is worth reviewing, a Bloomberg View reported. It boils down to a three-step process that might well serve as a model for how nations should deal with the next financial crisis, whenever that might be. I like to sum up it up as the three Ds: default, devalue, develop. Let's consider each in turn. The first step was to allow a default on the $85 billion in debt accumulated by the nation's banks. The three largest banks in Iceland -- Glitnir, Kaupthing and Landsbankinn -- had accumulated liabilities that amounted to almost 10 times the country's gross domestic product. Read more.