What Happened to Iceland?

It’s bankrupt. I'm shocked. Of course, I don’t know much about Iceland. A lot of little countries, unless you study them in Social Studies in grade school, are just places in
“Can You Find This Country?” computer games.

I did know they had a U.S. military base since I know someone who went there to teach children. (It was removed in 2006.) I assumed that women played an important part in their government. (I was right.) I thought they didn’t have trees but their official site does show pretty large shrubs.

Some things I didn't know: (Facts obtained from CIA’s World Fact Handbook)
The government is a constitutional republic.
It’s about the size of Kentucky.
Their population is less than 300,000.
People in Iceland mainly working in the service industry, public and private.
Their economy is primarily fishing and tourism.
They are not a member of the EU. They don’t want to lose control of their fishing rights.
They use a lot of geothermal power.
They have 0% permanent crops. (That’s a shocker.)
Median age is the mid-30's.
Life expectancy is 80 years.
Over 80% are Lutheran.
Literacy is 99%.
They have one of the world's highest per capita incomes.
The unemployment rate is (was?) 1%.
Currency is the Icelandic krona.
Public debt is 27.6% of GDP - 2007. (U.S. debt is 60.8% of GDP - 2007)

These are interesting facts, and there are more, but what happened to make Iceland bankrupt?

Back in April of 2008, USA Today ran an article saying that investors were taking money out of low-interest rate countries and putting it in Icelandic banks which paid high interest rates. Icelandic banks, flush with money, lent it to entrepreneurs who used it for risky investments all over Europe. In the end, Icelandic banks held foreign liabilities in excess of $100 billion. (Iceland has a GDP of $24 billion.)

This didn't go unnoticed by the global economic community because in February of 2008, Icelandic bank debt was lowered from “stable” to “negative.”

Ironically, the April USA Today article ends with the foreshadowing sentence: Icelandic banks are in no more danger than American banks.

Apparently, greed came before their downfall; but the krona is keeping them in the abyss. It isn’t a very good thing to have a currency which can’t be traded anywhere but Iceland; especially when you go over the economic cliff.

I don’t think any of us can write the ending to the Icelandic economic saga yet. But if I find a kid whose country is Iceland for their Social Studies project, I have some facts for him.