New Zealand == Iceland?

re: major financial crises that undermine their currency.

I sure hope not, but there are certainly some similarities. Iceland had a newly unregulated banking sector that accumulated astounding amounts of nasty low quality foreign debt, which was quite profitable until it wasn't. Now their economy is only slightly better than that of Germany's - in 1925. They still have fish and aluminum exports and loans from the IMF are keeping them somewhat solvent. It is, altogether, an unfortunate situation that could have been easily prevented through the use of basic financial regulation.

NZ is similar in that it has no exports of significance (#1 being dry milk solids) and had a rapidly expanding financial sector. And it is similar in that it's currency is rapidly losing worth (down about 35% since March from .82USD to .56USD) and accelerating. And part of the cause of their currency problems is the same.

Both countries benefited from the carry trade (people borrowed Yen and USD at low real interest rates, then invested it in NZD and Krona for high interest rates + currency appreciation).

I have no idea how big of trend this is or what happens next, but NZ's economy is small enough that something like this could easily get out of control and result in another addition to the IMF's desperate waiting list.

All in all, this whole crazy year has been an excellent argument for why operating in a small national currency is unjustifiably risky. Letting big banks do dumb things on top of that is suicidal.

When things settle down, I hope that more countries see the light and either join the euro or come up with regional alternatives.