“It is clear that most people don’t believe the financial crisis is over.” With those words the Federal Reserve’s annual confab in Jackson Hole came to a close, and another bank went under. What is noteworthy about the collapse of Denmark’s Roskilde Bank is that it did not fail because of subprime losses (it had almost none) or lack of liquidity (the bank had unlimited access to central bank funds), but due to dud real estate loans kept on its books. As this may be the next shoe to drop in the credit crunch, small Denmark is showing the way for the world.

The country has a proven record as a path-breaker. In 1992, Denmark’s “No” vote to the Maastricht referendum helped throw Europe’s exchange rate mechanism into chaos. Now it has some of the world’s most over-valued homes: since 2004, house price inflation has exceeded even that in the US, UK or Spain. Its consumers are also among the most indebted, with household debt at three times disposable income. This borrowing splurge was fuelled by inappropriately low interest rates imported via the Danish currency’s peg to the euro. Now that the splurge has ended, property prices are crashing. Indeed, Denmark was the first European economy to enter recession.