Iceland battens down hatches, cooling investor inflows amid volcanic growth
The economy is booming again, and hedge funds and other foreign investors want exposure to a surging tourism sector, banks, property, infrastructure and the soaring krona. Most capital controls from the 2008 banking crisis were lifted in March allowing money to flow in and out of the country more freely. But with more than 20 financial crises since 1875 and warnings from economists about the risk of overheating again, the government is being cautious. It has left in place restrictions making it prohibitively expensive to buy government bonds which offer returns of 4.5%, the highest of any developed economy. This week, the central bank took another step to try and break the cycle of boom and bust on the isolated North Atlantic island, clamping down on derivatives and other avenues it was worried were being used to bet on the krona. "There are a bunch of people I know who would love to put money into Iceland but they simply can't because of restrictions on the inflows," said Mark Dowd...
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