How Iceland's Financial Vikings Ran Aground

"The situation with the international financial markets was extremely unusual," said Haarde. "Money was very cheap and easily available everywhere."

Inga Jessen Petursdottir and her husband, Einar Balduinsson, bought a new house during the boom and began spending less time with their kids and more time at their bank jobs.

"Everyone had to have the largest cars, the biggest houses, and people our age, around 30, they were just floating in money," Inga Petursdottir said.

Even Morthens, the folk singer, cashed in. He became a judge on "Icelandic Idol" and began hanging out with the financial Vikings.

Iceland: The Bust

Nobody seemed concerned that Iceland's three biggest banks had borrowed six times more than the entire nation produces in a year. Or that they invested much of it in something from America called mortgage-backed securities.

After all, big American banks had done the same. But when Lehman Brothers came crashing down, Iceland's economy followed almost overnight.

"I lost a lot of money," said Alfsson. "I lost my job."

The same thing happened to Morthens.

"I lost millions and, for about three weeks, I was really shocked," he said.

Petursdottir and Balduinsson said their lives were turned upside down.

"It just really changed," Petursdottir recalled. "I lost my job, we didn't have money to buy anything like we were used to, and our apartment and our cars, we don't own anything in them. We just, we owe them, instead of owning them."

They are now bankrupt, and they rent their home from the government.

People looked to the government for help, but the government itself seemed confused, paralyzed.

"Definitely, these were the most difficult months of my life," Haarde said.

The economy started turning for the worse in September 2008. By December, protesters in this placid nation began showing up at the parliament building. The crowds got larger and angrier by the day, burning effigies and banging on kitchen utensils. It was enough to bring down the government.

What became known as "the pots and pans revolution" ended peacefully. There were no injuries, few arrests and the streets ran with thrown food instead of blood. But the prime minister was replaced, and two protesters were voted into parliament.

Birgitta Jonsdottir is one of them.

"We wanted a new government," she said. "We wanted the central bank manager to be fired, and we wanted a few other things. And we got them all."

Iceland: Lessons Learned

Some think testosterone was to blame for the turbulence. It was mostly men who ran the banks and took the risk. Now, two of the three biggest banks are run by women, and a female prime minister replaced Haarde.

There is a lot to be done. Unemployment is high, malls are empty, grand projects are silent and unfinished.

Stefan Alfsson has returned to the sea.

"Maybe you fish a little longer than you should and on your way home, you hit a storm," he mused. "You still have to sail the ship home. ... I mean through the hard times, it's through them that we become who we become."

Morthens is singing protest songs again and said the nation is once again finding solace in simple pleasures.

"I got a newborn baby. I got a beautiful wife. I have friends, I have family, I have my guitar, and that's all I need," he said. "Life goes on."

Petursdottir and Balduinsson are slowly rebuilding their lives and their bank accounts. They say the Kreppa, as Iceland's financial crisis is known, helped them rediscover each other.

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