Not Too Big To Fail

When the Lehman Brothers got bankrupt in 2008, it initiated a shock wave through out the planet and dragged the world into a turmoil know as the 2008 financial crisis. The crisis exposed the dark side of the banks to the whole world. Without any doubt the banks were responsible for the disaster but instead of being held responsible they were saved.

The UK created rescue packages for the banks and the USA bailed them out. Those people who suffered massive loss, suffering and grief still wait for justice today. As the members of the establishment in the west famously said for the banks that they are too big to fail. However in one tiny nation there was a revolution in the making. A revolution that shocked the east and the west of the world, that nation was Iceland. A nation of only 320,000 people decided to let that banks fail! As according to them the banks were not too big too fail. It didn't just stopped here they even jailed their bankers and especially the chief executives of the leading banks. Now lets discuss the events before, during and after this revolt against the banks.

The Uprising

In the 1990's the government of Iceland decided to improve the country's economy by introducing a low tax area for foreign finance and investment. This factor led the Iceland's big three banks Landsbankinn, Kaupthing and Glitnir to expand rapidly. Soon the Nordic island became a financial attraction for the international community.

From 1994 to 2008 Iceland's currency Krona became a major trading currency. In this period the currency's value increased by a staggering 900 percent. A country which only had aluminium and fishing as their major trade sources became an international financial hub. Many Icelandic and foreigners stored their savings in the three major banks.

This massive inflow of investment in the country made the bank's budget 10 times more the country's GDP. Every thing looked perfect until the world got struck by the 2008 financial crisis. Iceland's stock market collapsed as 80 percent of the stock in the market got wiped out. 97 percent of the banking sector collapsed and nearly every business in the country got bankrupt. The foreign investment was also hit by the crisis. For example many people from the UK and the Netherlands had invested in the so called "icesave" accounts. All of their savings were wiped out by the crisis.

The Icelandic public got in rage and decided to enter the streets. Massive protests and demonstrations were made, as all of them demanded that the banks should be held responsible for this turmoil. They also refused to pay any debt by the banks or any taxes which will compensate the banks.

The Revolution Begins

Initially the government had planned to support the banks just like the rest of the world but the public had other ideas. The nationwide protests and movements forced the government to take an alternative approach to solve the crisis. That alternative approach shocked the whole world of letting the banks fail. Instead of saving them, the government purposed plans such as setting up special agencies where people can get debt forgiveness.

The initial reaction of this decision was horrific as the stock markets further collapsed and the inflation got out of control. Although the banks were not bailed out but the government injected capital to stabilize the country. Iceland received $2 billion loan from IMF and $2.5 billion from its neighbors.

Letting the banks fail was still not enough as the Nordic nation further shocked the world by jailing its own bankers, for manipulating the markets. One of the most popular story spread throughout the globe, when Kaupting's former chief executive and former chairmen were sentenced between four and five and a half years. Along with this many brokers and major bank's share holders were also persecuted. During this time the government held twice a referendum on compensating the UK and the Netherlands of their losses due to icesave accounts. However the public on both referendums refused to compensate the UK and the Netherlands.

A New Era

After this bold and adventurous decision many leading economists suggested the country will further decline but by now, in 2016 all of those big economic commentators have been proven wrong. Iceland now had become the first European nation to emerge from the 2008 financial crisis.

Those bold decisions have now started to deliver warm results. The country's growth which dropped to 1.3 percent in 2012 has bounced back to 4 percent in 2015. In 2008 the country's inflation was at 13 percent by 2015 it dropped to 2.5 percent, which was a target rate. During the crisis the government devalued the Krona by 60 percent to maintain the wage level. This decision of devaluation of the Krona led to an increase in export revenue considerably and by now the nation has a budget surplus. Unemployment has dropped incredibly, as it is now below 3 percent. In 2015 Forbes declared Iceland the 15th best country for business. The tourist industry has also expanded rapidly in the last four years. The nation has also already payed back 20 percent of its debt to IMF.

There are still major economic challenges the country is facing such as the development of private sector. However the trends and the results are in the positive territory for the country. Iceland has now become the biggest and proven alternative model for the world. They have showed that size does not matter, its all about the power in the heart to change. The more we appreciate is still less as the country has achieved the unimaginable and the impossible. It is a shame for the rest of the western countries which claim to be a world power, that despite being a world power they still can not take such bold steps. This shows their claims of being bold, democratic and advocates of freedom are limited to the propaganda in the advertisements and the movies. Iceland despite being a small nation has practically proven the world that they are bold, democratic and the real advocates of freedom.

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