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Iceland
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International Trade Assignment Case Study of Iceland FinancIal Collapse MBA in Marketing&Communication Wang xiaoya YANG chen SHEN xiaoling

“The most spectacular bankruptcy of the 2008 financial crisis was the collapse of Iceland's financial system. This collapse is especially intriguing as Iceland is not an underdeveloped country!” ---EHMAN BROTHERS

Introduction
Iceland is an independent Nordic European island country situated at the confluence of the North Atlantic and Arctic Oceans, on the Mid-Atlantic Ridge. Its traditional industries are fishing, processing of fish, aluminum, and strong energy industry. During several years of economic boom, the Icelandic financial system expanded considerably. A nation with a slight population erected a banking system whose total assets were 10 times the size of the country's GDP. Greedy bankers, inexperienced upstairs, corrupt political elite, the deregulation of the financial system, make the banking sector grew faster than any other sector of the Icelandic economy. Following the global financial crisis in 2008, Iceland became the most dramatic economic meltdown. The key problem with the banks essentially owning all the bankrupt highly leveraged business (that were and are essentially good ocean harvesting fishing business) and the downgrade in sovereign debt rating led to capital flight. With the collapse of exchange rate of Krona, 3 main banks (Landsbanki, Kaupthing and Glitnir) are nationalized because of the serious liquidity problems of banks. By the end of 2008 rate of price inflation reached 18 percent. The government instituted the exchange rate regulations and controls to limit the use of foreign exchange rate regulations. The limitation of purchase of precious imports as food, drugs and oils are limited made the situation worse than ever. In order to deal with the crisis, the Iceland would adopt several solutions such as appeal to IMF for help, receiving the helps from Northern

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