Iceland is a tiny little country with just 338,000 people (about the population of Santa Ana, CA), but that doesn't mean it can't teach us lessons about public policy.

I wrote about the nation's approach to fisheries in 2016 and explained that the property rights-based system is the best way of protecting fish stocks from over-harvesting.

And in 2013, I wrote about how modest spending restraint was helping to solve fiscal problems created by the financial crisis.

Today, I want to further explore Iceland's fiscal policy, largely because of this remarkable chart that accompanied a Bloomberg report on the country's budget strategy.

As you can see, debt skyrocketed during the financial crisis and has since plummeted at a very rapid rate.

This shows debt reduction is possible. Indeed, there can be huge reductions in a very short period of time.

So there may be hope for nations that are in the midst of fiscal crisis (such as Greece), nations that are about to suffer fiscal crisis (Italy is a prime candidate), and nations that will suffer a crisis if there isn't reform (most developed nations, including the United States).