Iceland's Economic Catastrophe in October 2008 Recalled
In the chilly autumn of 2008, the small nation of Iceland was hit with a full-blown financial meltdown, causing widespread havoc and outcry. The people's trusty savings became a distant memory as three major banks crumbled, leading the nation to the brink of bankruptcy. The country's economy, fragile as it was, suffered a devastating blow.
The streets lined with protests, with citizens voicing their outrage outside the banks and public institutions. At the same time, the news outlet mbl.is started capturing the turbulent scenes of this troubled period in Iceland's history.
The initial footage brings you face-to-face with the raw emotions of people racing to their banks, only to find their hard-earned savings had evaporated like mist in the wind.
Iceland's crisis, part of the larger global financial turmoil, was a domino effect caused by the burst U.S. housing bubble and the subsequent subprime mortgage crisis. The country's three largest banks – Glitnir, Landsbanki, and Kaupthing – had racked up debts equalling nearly six times the nation's GDP. This staggering debt-to-GDP ratio left the banks overextended and vulnerable when global liquidity dried up [1][2][3].
In a desperate attempt to contain the crisis, the Icelandic government enacted emergency legislation to take control of the troubled banks, avoiding direct responsibility for the banks' overseas debts [4]. The government established new banks to handle domestic affairs, leaving the old banks to weather the storm of bankruptcy. The Icelandic króna plummeted following dramatic interest rate hikes, reaching about 250 króna per euro. International aid flowed in, including a $2.5 billion loan agreement from the Nordic countries and a $5.5 billion bailout arranged with Russia [4][5].
Amidst the chaos, mbl.is managed to document the unfolding events with unfiltered video clips and news coverage. Their archives provide an unparalleled window into this pivotal moment in Iceland's history, featuring footage of parliamentary emergency sessions, public reactions, bank closures, currency fluctuations, and statements from key Icelandic officials [5]. The archives bring the immediacy and gravity of the crisis to life, capturing the dramatic events as they unfolded.
The financial turmoil of 2008 affected not only Iceland's economy but also its banking-and-insurance sector, as the three major banks, Glitnir, Landsbanki, and Kaupthyng, were significantly overextended due to debts equalling nearly six times the nation's GDP. This industry-wide crisis led to a significant loss in the public's trust in business and finance.
