When the Icelandic króna dropped by 7% on the 21st of February 2006 causing ripple effects in the currency markets of several countries, many had a strong sense of foreboding. How could the currency of such a small country have such significant “contagion” effects? Was this a sign of overstretched financial markets globally? Did it herald an upward jump in risk aversion and a new period of heightened volatility in financial markets? Was it possibly the beginning of the unwinding of global imbalances? From the standpoint of Iceland, the question was whether the event heralded a “hard landing” of the Icelandic economy and even the outbreak of a financial crisis after a period of unprecedented internal and external imbalances. In order to address these important questions, those who participated in this conference discussed the recent global conditions of low cost and easy access to credit, partly created by very accommodative monetary policy in all of the three major currency areas, and, second, the effects of ongoing financial integration of small countries with relatively developed financial systems. Some also argued that US long-term interest rates had been significantly affected by financial globalization in recent years. However, it was pointed out that small countries are potentially more vulnerable here. Maybe more importantly, it was suggested that whereas US monetary policy might have become less effective in terms of affecting domestic medium- to long-term rates, it is leveraged up by other countries in the dollar zone that follow the US lead.