It seems amazing to me that no-one has made the link between the Icelandic saving bank situation and the amazingly high interest rates that were being offered. Didn’t any of the individual or institutional investors stop to think and then ask why the banks were ready and willing to pay interests rates way above anything else available in the UK? I always thought higher returns meant higher risk? So in effect those people and organisations, including Local Authorities, took a gamble and lost. Would Gordon Brown and his merry men be rushing in to guarantee the stake money on a bet at the races. The 7% interest on offer with Kaupthing simply did not make sense compared with the 5% that was the best available in the UK at the time. Those who took the Icelandic gamble enjoyed the inflated returns until the collapse and and now, thanks to Brown and Darling, could still get most of their money back.
Having your cake and eating it is the phrase that comes to mind!