Iceland, "the first country to be run like a hedge fund", was the original warning sign of the current financial crisis. Today's chaos in the country, following its rejection of the €4bn bank compensation deal agreed with the UK and The Netherlands, may similarly prove to be the fore-runner of the next stage in the crisis.
Back in March, the blog suggested that public reaction to the financial crisis would probably follow the Phases first described by Elizabeth Kubler Ross:
• Denial that any change is taking place
• Then Anger at the implications of the change
• Bargaining to reduce its magnitude
• Depression as reality begins to be confronted
• Finally acceptance of what has happened
Today, some are still in Denial mode - particularly those in financial markets, who claim to believe in a rapid V-shaped recovery back to 2007 Boom levels. This Denial of reality is helping to fuel a rapid rise in Anger amongst the rest of the population - particularly as 2009 bonus payments seem likely to reach $65bn.
In the US, Nobel laureate Paul Krugman is now warning that "there's a populist rage building in this country, and President Obama's kid-gloves treatment of the bankers has put Democrats on the wrong side of this rage". If such Anger, however understandable, comes to dominate political debate, then it will become very difficult to move to a Bargaining phase that seeks to mitigate the major problems we now face.