Iceland is seen as somewhat of a microcosm for fears that the European banking system is spinning out of control. Tons of money flowed into Iceland in recent years, much of it Russian, according to media reports, inflating the tiny economy out of all proportions. The bubble began to collapse on its own and Russian troubles are only exacerbating the problem. Icelandic money has been recycled into the UK at a huge rate and the implosion in Iceland has only helped drag the UK down with it. An amazing, but ugly story.
Hopes for a US bank bailout are running high and remind the market that Europe would be hard pressed by the lack of pan-European institutions beyond the ECB to do the same. Submerging markets and overextended banks are coming together to support the greenback in new and unexpected ways.
