Iceland's Economic Troubles In 2008

            This financial crisis was one of the main economic and political conditions in Iceland that were based on the default of the three of the country's major privately owned commercial banks in 2008.  This was due to them having problems in refinancing their short-term debt and the deposits on Netherlands and the U.K.  According to the size of the Iceland's economy, this was the largest banking collapse that was ever experienced by the country in the economic history.  This economic crisis led to the economic despair and a huge political turbulence.   The financial crisis happened because the banks were able to form a lot of cash and too fast where they used the money to increase house rents and use it on the financial markets.  Each time the bank made any loan, they formed new money.  In the financial crisis, the banks formed a lot of money which they derived from making loans.  Due to the amount of cash that was doubled in the past seven years, the debt in the economy also doubled (Boyes, 2010). 

            As the banks used the money they had to increase the prices on houses and gambled them on the fiscal markets, a little of their cash was invested in the businesses that were around the financial sector.  Some were used in the residential property which was used to increase the house prices more than the wages. Others were used in the commercial real estate for building offices and other business locations.  Others were used for buying credit cards and individual loans.  AS the banks lend a lot of money in the residential sector so as to push the market prices together with the individual debts, the interests were to be paid on the bank loans and this led to the increase in debts.  The debts rose more than the incomes where some of the people were unable to pay their loans. This made them stop paying their loans and got themselves bankrupt.    The financial crisis happened because there was a failure to oblige the financial system, creation of the private cards and cash (Boyes, 2010). 

            Iceland has been recovering from the financial crisis since 2011.  Their gross domestic products have been increasing at about 2%.  This has led to the increase in salaries making the depreciation of the federal debt as the government had already paid much of their debts which it got from the Global monetary funds.  By the whole country's population maintaining its lowest risk of poverty and the social elimination in Europe, this has led to the depreciation of unemployment rates (Eiríkur, 2014). 

            The lessons that are learned from the Iceland crisis is that if each country is able to have capitalism substitute so as to find solutions to such crisis, there would be the clarity and a state direction from the capitalist economic activity.  The crisis remains to be a huge account in Europe but the Iceland population forced their political leaders who were responsible for the neoliberal programs to resign.  This made the country to become the most Europe's most quick economic recoveries. The ruling families in Iceland were becoming dissatisfied with their economic condition as the country's small size placed boundaries to their   profit chances.  As the economic and political crisis increased, the Oddsson's leadership of the Independence party got more attracted to the population (Eiríkur, 2014). 

 

 

 

 

 

 

Reference

Boyes, R. (2010). Meltdown Iceland: How the global financial crisis bankrupted an entire country. London: Bloomsbury.

Eiríkur, B. E. (2014). Iceland and the international financial crisis: Boom, bust, and recovery. Houndsmills, Basingstoke: Palgrave Macmillan.