potential collapse of their largest banks, chose to bail them out. But one country - Iceland,

did the exact opposite. They let their banks fail, and many financial experts were surprised

with the “remarkable” recovery seen by the Icelandic economy. So, how did Iceland

beat the banks?

Well, it’s important to note that Iceland is a small, isolated country in the Nordic

region. Its main industries are fishing and aluminum smelting, which are relatively consistent

sources of income. For the past decades, Iceland has seen steady economic growth, and comparable

standards of living to its Nordic neighbors.

In 2000, Iceland privatized its banking industry. This opened the doors to foreign debt, and

by 2007, two-thirds of their financing came from abroad. When the global recession hit,

three of iceland's major banks collapsed. This was attributed to overextending their

loans and making unsavory business decisions. For instance, one infamous bank, Landsbankinn,

made Iceland residents responsible for more deposits than they could make payments on.

Unlike in the United States, where the bank’s deceitful actions merited a bail out, Iceland

refused to do the same. Iceland’s Central Bank Chief and former Prime Minister was quoted

as saying, "we do not intend to pay the debts of the banks that have been a little heedless".

Instead, the government instituted social welfare and debt-forgiveness programs, effectively

bailing out their own citizens. Additionally, a number of corrupt bankers were even jailed

for their role in unscrupulous lending. As a result, today Iceland is holding a steady

annual growth rate of 3% annually. By comparison, other european countries like Greece and Estonia

struggle to maintain a growth rate of 0.2 % and 1.1% percent. Iceland also maintains

a low unemployment rate - around 4%, while countries like Greece have seen their unemployment

rate hit almost 30%.

Not all countries can do what Iceland did. But their success can certainly serve as a

model. The Icelandic President also made a point of comparison between their financial

reforms and the EU’s current austerity measures. If the struggling European economies “introduced

currency controls”, “let [their] banks fail”, and “provided [more] support for

the poor”, they’d be following in Iceland’s path. However, despite their success, letting

the banks fail also came with a lot of risk. For many larger countries, an economic collapse

could devastate the world economy as well. In the case of the US, they decided they had

too much to lose.

Ever heard of swiss bank accounts, and how they’re used to provide a safe-haven for

financial privacy? This might not be the case anymore. Check out our video here to learn

all about it. Thanks for watching TestTube!