We all know that the U.S. is having some money troubles. We've gotten used to hearing 'seven hundred billion dollars' repeated and echoed on TV and the radio and in print. But we are not alone in economic distress. Europe's been feeling a little panicked, too.
By my reckoning, the first country that did a bail-out plan was Ireland. They jumped right on it:
Ireland said Tuesday it would guarantee payments on as much as €400 billion ($563 billion) in bank debt...The figure, which the government said guaranteed nearly its entire banking system, is twice the country's gross domestic product.
Ireland acted a lot faster than the US in doing a bailout. And in terms of the size of the each respective country, Ireland's move is substantially larger than America's 700 Billions. Ireland is not nearly as large as the US. I think that speaks well of Ireland's concern for its people and for its reputation. People will not say that the Irish renege on promises. Although, I would feel concern if I were an Irish taxpayer. But Ireland will probably come out all right.
That's not true of every country. Take Iceland. Right now, the big explosion of Iceland's banking has left nothing but rubble. Last year, the excitement was high and the money was pouring in. At that time, The Times of London described the scene in Reykjavik, the capital of Iceland. The "billionaires boys club" rode the wave of a deregulated banking system. The Icelandic Krona was quite expensive, and everyone was living large:
Flush with cash raised domestically and from international markets and headed by fresh-faced entrepreneurial chief executives, firms such as Bakkavor Group, FL Group and Baugur have used Reykjavik as an unlikely base for aggressive overseas expansion...
The success of these firms has attracted overseas investment far out of kilter with Iceland’s own small economy... It is one reason for the run on the currency sparked by a mini-financial crisis in Iceland last year. Standard & Poor’s, the credit rating agency, gave warning last week that it may cut the country’s sovereign rating, causing alarm bells to ring ...To tame inflation it has lifted interest rates to a record 13.75 per cent.
Interest rates of 13.75%? Hot damn! Sign me up! But wait a minute. Even the optimistic Times says there was a mini-crisis in 2006 and some alarm bells were ringing because the bank's reach is out of kilter with the country. But people believed that banks are solid. They never fail; they always keep their promises.