NEW YORK (Fortune) -- It's time to start paying attention to the financial sinkhole that Iceland is trying to climb out of -- the view from inside of it is eerily similar to our own.
An Icelandic savings bank, Icesave, had attracted billions in deposits from hundreds of thousands of British and Dutch citizens, due to the phenomenally high interest rates it offered. Icesave collapsed in 2008, for much the same reason Lehman Brothers, WaMu, and hundreds of local savings banks did: its bankers used their cash to make complicated, bad, leveraged investments, mostly on real estate.
The British and Dutch have made their citizens whole, bailing out Icesave after it became clear the Icelandic government didn't have the resources to do the same.
Now, they expect to be repaid. But in a referendum there this past weekend, only 1.8% of voters favored a plan to pay back the $5.3 billion Iceland owes. It would have worked like this: the International Monetary Fund would loan Iceland the cash to pay back the British and Dutch. Iceland, then, would repay the IMF.
To call the rejected terms loan-sharking would be a disservice to usury. They called for every Icelandic family to essentially throw a quarter of its income towards servicing the loan for the next eight years. But this isn't the end: one way or another, the bill will come due, and Iceland's 320,000 citizens will be paying for the hubris of a few hundred of their own, who dubbed themselves "investment bankers."
The amount owed -- $5.3 billion -- sounds like a rounding error to Americans, but, per capita, it would be the equivalent of the United States taking on a $5 trillion debt. Sounds impossible, until you consider that our real bailout tab, as calculated by the New York Times, is already $2 trillion.
Moreover, the government has obligated itself to pay out $12.5 trillion if things get worse. In Vanity Fair last April, Michael Lewis wrote, "Iceland instantly became the only nation on earth that Americans could point to and say, 'Well, at least we didn't do that.'"
Yet in a pretty real way, we did do "that." We have a more sophisticated central banking system, and there are more countries, like China, in whose interest it is to protect the value of the American dollar, thanks to their ownership of our national debt.
In that crucial way, we've dodged Iceland's true peril: watching the value of its currency, the króna, crash against the debt it owes in foreign currencies like the sterling and euro. It's looking more and more like our craftiest bankers factored the inimitable strength and guarantee of the U.S. dollar into their reckless gambles.
did vote Yes.
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