Is Iceland facing a meltdown?

Investing in high yielding emerging markets is risky - as Iceland’s experience shows. With inflation at 4%, a trade deficit at about 10% of GDP, and, even more frighteningly, total debt at 350% of GDP, Iceland’s economy faces meltdown.

Updated, 7th October 2008: For more on Iceland's financial crisis, see: How Iceland's meltdown affects you

Last week we referred to Ben Bernanke's presiding over the US economy as it slithers steadily towards what Mr Paul Keating might have described as a "banana republic!" For an object lesson in what economic mis-management might lead to, Mr Bernanke need only cast his eyes to the North Atlantic where the Icelandic economy is heading towards "melt down".

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