Then, last month, the wind blowing out of Iceland was more metaphorical than meteorological. When Fitch Ratings reduced the outlook for the country's foreign and local currency ratings to 'negative' from 'stable', Iceland fell into crisis. The krona plunged in value at a time when the benchmark interest rate was 10.75%.

By itself, that might not matter much to the global economy. Yet the troubles afflicting Iceland are eerily reminiscent of those facing the UK and the US.

Iceland is emerging as a microcosm for much larger, more important nations. Its sudden change in fortunes may serve as a trailer for future events in the world's major economies. Fitch cited concerns that Iceland's economy may be in danger of overheating. It referred to 'an unsustainable currentaccount deficit' and 'soaring net external indebtedness'.

The result? A run on the krona. The currency slid 4.6% against the dollar on the day of the outlook change, and 2% the following day. "The krona suffered a full-blown speculative attack, " said Beat Siegenthaler of TD Securities in London.

So what, if anything, can be read into the Icelandic story? "There are certain resemblances between Iceland and the AngloSaxon nations, but perhaps an important difference is that the population of Iceland is only 300,000, " said Stephen Lewis, chief economist at Monument Securities in London.

For those who don't follow it closely . . . and that means most of us . . . Iceland's economy has been something of a star in recent years. Unlike the bigger European nations, it has pushed through a programme of free-market economic changes.

"Iceland's growth dynamics have vastly improved since its policies changed course in the 1990s, shifting towards financial stabilisation and market liberalisation, " the OECD said in a recent report.

"Economic expansion since the middle of the last decade has considerably bettered that in the OECD and in particular in other European countries."

Likewise, the Heritage Foundation, a research institute in Washington, placed Iceland at number five in its latest global ranking of economic freedom. It was level with the UK, ahead of the US and not far behind Singapore.

Iceland is a dynamic economy with growth averaging over 5% in the past two years, according to the OECD. The snag is that growth hasn't been very balanced. Iceland also has a huge trade deficit, and inflation is well above the central bank target of 2.5%.

In 2005, Iceland's current-account deficit ballooned to 15% of gross domestic product. Even scarier, non-government credit was more than twice the size of Iceland's $12bn economy at the end of last year, according to Fitch.

Total external debt was equal to 187% of GDP in 2004, the central bank said on 22 November.

In September last year, inflation peaked at 4.8%.

Sedlabanki, Iceland's central bank, has almost doubled the benchmark interest rate to 10.75% since May 2004. It may go higher before the economy comes back under control.

Big infrastructure projects have helped swell the trade deficit. Iceland is clearly an economy kept afloat on a rising tide of debt, and needs to draw in a lot of capital every year to maintain growth.

Now who does that sound like? Both the UK and the US are relatively liberal economies with aboveaverage growth rates. And they both run huge trade deficits and have massive borrowings. In the UK, for example, the amount owed by consumers is almost equal to the country's GDP.

"Wherever the capital inflows come from, it is clear that Iceland would not have been able to run so large a current account deficit without them and would have had to curb internal demand a while ago, " Lewis said. "The same is true, of course, of the US and the UK. The key question in these instances is how reliable the capital inflows are."

Quite so. Neither the US nor the UK has a current account deficit anything like Iceland's 15% of GDP. Yet both countries rely on huge, continual inflows of international capital to stay afloat.

So long as investors are happy to provide that, everything is fine. Should they go elsewhere, there will be a problem that can only be fixed by a depreciation of the currency, or a slowdown in growth.

As Iceland shows, the outlook can turn very chilly indeed.