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To those who said (and still say) that a sudden massive currency (and hence economic) devaluation as bad or even worse than that experienced during the Great Depression can’t happen in the United States (or other industrialized countries) in this day and age — The example of Iceland in the second half of 2008 stands as a stark counterexample and warning for those who are not aware of and do not heed the lessons of history.

According to the latest CIA World Fact Book at https://www.cia.gov/library/publications/the-world-factbook/geos/ic.html, Iceland’s Gross Domestic Product per capita (adjusted for purchasing power parity) was estimated at 16th highest out of 229 nations at $42,600 USD as of July 2008.

GDP – per capita (PPP): $42,600 (2008 est.)

From the popular currency site, xe.com at http://www.xe.com/ict/, we obtain the following numbers showing the value of Iceland’s currency (the Kronur) per U.S. dollar at the following dates:

July 31, 2008 79.1884784526
November 31, 2008 142.9000000000
January 25, 2009 123.8900000000

devaluation from July 2008 to November 2008 = 63.71 units or 80.5%
devaluation from July 2008 to today = 44.7 units or 56.4%

Iceland’s currency was devalued by a whopping 80% versus the U.S. dollar in only 4 months since the end of July 2008. Even as of today, in less than half a year, it is still devalued by more than half.

To put this in perspective, in just 4 months, Iceland’s people saw their standard of living in terms of GDP per capita (PPP) go from 16th highest in the world out of 229 at $42,600 USD in July 2008 to 118th at $8307, at just less than the Peruvian’s before the devaluation. At $18,574 now, Iceland is poorer today than Puerto Rico was before the devaluation.

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