Icelandic banking

Iceland has accumulated debts amounting to 850 percent of its GDP. (The parlous US economy only managed 350 percent). Most of the damage was inflicted by a wild and unsustainable culture of financial speculation - a bubble waiting to burst:

...another hedge-fund manager explained Icelandic banking to me this way: You have a dog, and I have a cat. We agree that they are each worth a billion dollars. You sell me the dog for a billion, and I sell you the cat for a billion. Now we are no longer pet owners, but Icelandic banks, with a billion dollars in new assets. “They created fake capital by trading assets amongst themselves at inflated values,” says a London hedge-fund manager.

- Michael Lewis, 'Wall Street on the Tundra', Vanity Fair, April 2009