Iceland's Financial Collapse Mirrors Wall Street

I've just finished a lengthy and interesting article about the financial collapse in Iceland. There are many, many parallels between their situation and our own here in the United States. Perhaps this article will reinforce the alarms which should sound in every single person when they are offered something for nothing.

Wall Street on the Tundra

Iceland’s de facto bankruptcy—its currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insurance—resulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjavík, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.

Particularly interesting is this indirect argument for regulation:

One of the hidden causes of the current global financial crisis is that the people who saw it coming had more to gain from it by taking short positions than they did by trying to publicize the problem. Plus, most of the people who could credibly charge Iceland—or, for that matter, Lehman Brothers—with financial crimes could be dismissed as crass profiteers, talking their own book.

It doesn't take a rocket scientist to figure out that kids playing together with no supervision will not do what's best for the group as a whole. The same thing applies to any system driven by self interest and promotion (i.e. unregulated markets). Independent regulation and oversight is a must for any long term balance and safety to be maintained.