Customer Reviews

Meltdown Iceland: Lessons on the World Financial Crisis from a Small Bankrupt Island

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This case study is a perfect example of the benefits and dangers of leverage. During periods of expansion, leverage can result in explosive growth; such was the case with Ireland and Iceland. Leverage in the face of contraction, however, can be catastrophic. Meltdown Iceland tracks the stratospheric rise and calamitous collapse of the Icelandic economy during the first decade of the 21st century.

It has been advanced that Iceland's demise is a microcosm of the financial meltdown experienced by the world markets and the United States in particular. It is on a scale, however, that can be grasped far more easily than the trillion dollar figures bandied about so easily on a larger scale (One economist estimates that Iceland's meltdown was caused by a mere thirty people!). Nevertheless, it would be inaccurate to somehow label Iceland as a smaller model of the United States. As the author points out, Iceland is virtually without hard assets of any kind. It built a veritable house of cards, with enormous debt ratios and loans which had little or no security behind them. In fact, Iceland can be more clearly seen as a larger version of a credit card debt laden, asset poor, American consumer than a smaller version of the United States financial system.

It doesn't take long to get a vague idea of where, according to the author, Iceland's troubles began. Time and time again, Ronald Reagan and Margaret Thatcher, through their acolyte David Oddsson, are mentioned in connection with the root cause of Iceland's predicament. Initially, a poor, sleepy, backwater country was dragged kicking and screaming into the 20th century by virtue of its strategic location as a NATO outpost. American servicemen and hard currency made Iceland a modern nation; the author examines the positives and negatives of the transformation. But the advent of Reagan/Thatcher style privatization and the destruction of the Icelandic social ethic are identified as the root cause of Iceland's stratospheric rise and predictable calamitous failure.

The first quarter of this book is moderately interesting in setting the "scene of the crime" through an analysis of Icelandic history and some of the figures therein. The book soon bogs down, however, in an overly detailed "blow by blow" account of the numerous machinations contrived by the "Young Vikings" who allegedly hijacked Iceland's economy through a conglomeration of the countries industry and banking systems. As the house of cards begins to unravel, interest returns, and the final 75 pages are again moderately entertaining.

Unfortunately, there are numerous misspellings and grammatical errors; far too many to be excused in even an "advanced reading copy". For example, in referring to the Glass-Steagall Banking Act, it is observed that "the Act was repeated, not by Ronald Reagan, but by a Democrat, Bill Clinton". I think what the author is looking for is "repealed". Quite a significant difference, to repeat as opposed to repeal. Also, this beauty: "Iceland is a Lutheran country, but an understand one". ??? There are numerous other similar errors. At times, the economic analysis is far too dense for amateurs such as me. At others it is laughably naïve and simplistic.

My impression is that the writer of this book couldn't exactly decide what he wanted it to be, an academic economic treatise or a moderately entertaining look at what could have been a fascinating case study. As a result, it tries to be both and ends up being neither.

I must have received a better edited edition of Meltdown, as none of the problems with the text cited by earlier reviewers appeared in mine.

Boyes has done an excellent job investigating the interaction of a culture and its financial system. He does so with a clear eyed balance and sense of moderation.

Iceland, as Boyes points out, is a uniquely problematic economy because the home population is miniscule, hardly more than a typical small American city, especially relative to the gross area of the island surface, which is forbiddingly rough, not conducive at all to agriculture. The economic aspects of Iceland are naturally limited to an unusual resource mix, fisheries and aluminum smelters primarily. The only other more abstract resource Iceland posseses is its geo-strategic position near the arctic where it serves as an ideal forward base for either the United States or the (former) Soviet Union.

On the cultural side of the equation, the Icelandic system is uniquely ancient, heavily intermarried and obsessed with family trees, often dating back to the 10th century. This deeply rootbound system has produced a tiny, self absorbed elite that has traditionally held controlling interest in pretty much any and all Icelandic industry that matters.

As Boyes details here, with globalization, there would be an inevitable collision between the condensed, inward looking traditional system and the rise of the Neoliberal model of open borders and free capital flows.

At first, this seemed like a magical elixir had been discovered which could transform the static, engrained world of customary relations and limited horizons into a delerious, fantasy Iceland of cutting edge hipness, rather as if Iceland had take a quantum leap from being the ultimate backwater to the very model of the new economy.

The less romantic reality appear to have been that Iceland was both seduced into believing things about itself that could not possibly be true, as a model of sustainable growth, and Iceland's far more cynical investor class lit on the idea of using Iceland's banking system as a way of systematically looting not only the citizens of Iceland, but more, depositors in the EU who could be tempted into parting with their savings, their retirement funds, and entire community investment projects. When the fantasy imploded into a cloud of volcanic dust, so did many billions of gullible foreign investment. It sounded not unlike many of the tales recounted by Charles McKay in his classic work Extrordinary Popular Delusions and the Madness of Crowds. The more things change, it seems, the more they stay the same.

Boyes then notes, most interestingly, that right before the great collapse, a large percentage of Iceland's baking system's capital base was spirited off to the tax haven island of Tortola in a flurry of shell corporation asset shifting. It would have been excellent if Boyes could have expanded on exactly how much was wired out of the country, on who's authority, to the sunny island of Tortola. Because if this claim holds up to scrutiny, there would have been a much greater element of foreknowledge and premeditation than the bankers allowed.

Needless to say, the charming nation of Iceland to this day remains embroiled in exactly the profoundly dysfunctional system that led up to to the denoument, one day saying it will honor its deposit guarantees, and the next day vetoing them. Quelle surprise.

Boyes book is essential reading for anyone considering a career in international business or developing nation finance, and probably should be a required text in American business schools as well. There is much to learn from this remarkable cautionary tale.

Most people aren't very familiar with Iceland, an isolated, homogenous, near-Arctic island. Now, thanks to Roger Boyes's wonderfully told tale of its financial collapse, readers can learn what happened to the economy, politics and culture of this unusual, mostly-frozen nation. Iceland was the unlikely first victim of the 2008 global financial collapse - the actual canary in the coal mine. Its financial excesses, cronyism and poor governance serve as a microcosm of the problems facing the largest capitalist nations. Boyes's financial case study flows like a novel. He is unafraid to draw biting conclusions from his detailed presentation: here, villains are villains, greed is greed, names are named. This fast-moving story puts the global fiscal meltdown into perspective. getAbstract rates this as important reading for anyone who seeks insight into the 2008-2009 international economic crisis, which began in this lone, cold outpost and then burst into global flames.

I enjoyed the detail laid out by the author concerning the disdain the government had shown toward some of the "Viking Raiders" and how local politics from decade old feuds rendered the central bank effortless to see the crisis as it was unfolding. It was difficult for me to endure the ridiculous assertion where the author tries to blame "Reagan and Thatcher" for what happened in Iceland. As I continued to read it became apparent the author had either been turned down for a loan by one of the Icelandic banks and or bullied by Icelandic children during his childhood. The book is a glaring anti-capitalism opinion piece predicated on the same political rhetoric we are used to reading in any newspaper these days.

As an alternative, written without the bias I would strongly suggest the book, "Why Iceland?: How One of the World's Smallest Countries Became the Meltdown's Biggest Casualty" Asgeir Jonsson (Author)

The book is an eye-opening approach to the current talking points of cable news. It's informative, interesting, and a bit scary.

This book is one of the best and most concise reckonings of a nation's financial missteps that I have read to date. Although not particularly written as a commentary on human action and/or behavior, this book shines a rather grim light upon how the masses can be swallowed up by the pride and hum-buggery of just a handful of people whose interests are not aligned with the good of all beings. It's shocking.

The author makes it very easy for the reader to follow all of the characters by name as the tragedy of Iceland slowly unfolds in his story. I believe he was able to do this by explaining the Icelandic method of naming children and lineage. It was very wise to explain this in the beginning of the book, which the author did.

I highly recommend this book, which paints a very clear and dismal portrait that shows the reader exactly how greed can consume us all, even though that greed might be pursued by only a handful of people. It is like a highly infectious virus.

This book is structured in a very messy way, add to that the fact that the author's style is everything but clear and you obtain a boring book and that misses its goal...

Short but still unreadable; I gave up after the first two chapters. Boyes's supposed 'history' of Iceland reads like it was written by a PC-indoctrinated high school student, full of sneers about "genetic purity" and "xenophobic ranting".

This attitude prevents people like Boyes from understanding events like today's: after a public uprising, the Icelandic President is refusing to sign the so-called "Icesave" law, which would repay British account holders. Contrast that with our own President and Congress, who passed the bank bailout over a 100:1 level of popular opposition.

Gee, you think that "xenophobic ranting" of the racial pure descendants of Europe's first democracy might have something to do with being the only country to stiff the foreign bankers?

If your desire is to understand the recent economic difficulty, this book is a hidden gem.

When an attempt is made to understand that economic and banking crisis in the United States and Europe, there are simply too many personalities, institutions, governments, and other players. Iceland, on the other hand, is a sovereign nation that has its own currency, financial regulators, and central bank. It is, however, a country of about 300,000. The number of variables are reduced to a level that can be understood.

Thankfully, the author spends enough time setting the stage through discussion of Icelandic history, perspective, and personality. The crisis days become far more understandable when viewed through that context. The author then relates many of these mistakes to the similar mistakes that took place in the US and Europe.

This is an excellent book!