God Bless Iceland: The Crash That Doubled Everyone's Loans

It's October 2008 in Reykjavík. You're a fisherman who gets paid in krónur — and your loan is in Japanese yen and Swiss francs, because the man at the bank said it was cheaper. Within one week, all three of Iceland's big banks collapse, Britain uses an anti-terrorism law against an Icelandic bank, and your debt starts to double. This is the Icelandic banking crisis explained simply — with cod, pots and pans, a volcano and a piggy bank named Penny.

How did three banks in a country of 320,000 people grow to more than ten times its economy? What is the carry trade? What was Icesave, why did Iceland vote no twice — and what happened to ordinary people with foreign-currency loans?

⏱ Chapters
0:00 So you borrowed in yen in Iceland in 2008
0:50 A rock in the Atlantic
1:19 Banks go private, banks go big
2:06 The magic of high interest (the carry trade)
2:52 Your cheap loan in yen and francs
3:48 Party time
4:30 Icesave
5:10 Bigger than the country
5:48 The cracks
6:28 September 2008
6:58 God bless Iceland
7:38 An anti-terrorism law against a bank
8:25 Three banks in three days
9:00 Your loan doubles
10:04 The hangover
10:53 The Kitchenware Revolution
11:47 Who pays for Icesave?
12:46 Your loan goes to court
13:25 The bounce (thanks, volcano)
14:15 Legend vs reality
15:12 3 lessons from Iceland 2008

???? Sources
• Wikipedia: 2008–2011 Icelandic financial crisis; Icesave dispute; Landsbanki Freezing Order 2008; InDefence; 2009 Icelandic financial crisis protests; Geir Haarde
• Gylfason, Holmström, Korkman, Söderström, Vihriälä — "From Boom to Bust: The Iceland Story" (2011)
• Government of Iceland — Address to the Nation by Prime Minister Geir H. Haarde, 6 October 2008
• CNBC (30 June 2009) — Can Iceland Be Saved?; CNN Money (20 November 2008) — Iceland gets $4.6 billion bailout
• Reykjavík Grapevine (16 June 2010) — Supreme Court rules loans pinned to foreign currency illegal; Arion Bank newsletter (September 2010)
• ORF — Can Iceland survive another crisis?; Iceland Monitor (2015) and ITV (2015) — Iceland's last McDonald's burger
• ECB euro reference exchange rates (2007)
Some figures are rounded. The hero and his loan are a composite example, not a real person.

???? Images
• Reykjavík from Hallgrímskirkja — photo by Tim Wright, CC0 (Unsplash via Wikimedia Commons)
• Iceland from space (2004) — NASA / Jeff Schmaltz, public domain
• Ash plume from Eyjafjallajökull, 21 April 2010 — NASA, public domain
Characters, drawings and animation: original. Real people appear only as simple labelled stick figures; no real logos are shown.

This video is for education and entertainment. It is not financial advice.

#FinancialHistory #Iceland #Icesave