US libertarians, and some of those who share their rhetoric on the right, are strong proponents of laissez-faire economics and limited government. However, in the case of Iceland and its banking crisis of 2008 we seem to have, on the face of it, a counterexample.
Iceland's banking sector was allowed to grow to a disproportionate size relative to Iceland's GDP, including by offering foreign currency savings accounts at attractive interest rates, which implicitly put the Icelandic government, and therefore the Icelandic people, on the hook for ultimately repaying other countries when Iceland's banking system collapsed and a systemic Icelandic bank run occurred. The whole sector was unsustainable.
Is there any coherent libertarian argument, that is consistent with the facts, for the proposition that Iceland imploded in 2008 due to "big government", rather than a lack of government regulation?
Alternatively, was there any argument based on libertarian principles for greater government regulation of banking in Iceland - and if so, why was it that no libertarian, and no generally-laissez-faire economist, made that argument before 2008? Indeed, quite the contrary. Before the banking crash, Iceland was pointed to as a shining example of free market economics gone right.
Note that it is difficult to make a coherent argument from a libertarian position that this was "just bad apples", because if the "bad bankers" of Iceland be merely "random" bad apples, they caused Iceland to have to reject basic principles of free market economics like "there should be no capital controls". In which case, free market economics can lead to its own downfall, at least in a small country like Iceland - and, by the law of averages, would be more and more likely to, the longer it went on.