In the aftermath of Iceland’s economic meltdown, the prime minister resigned and the conservative government, led by the Independence Party, collapsed. Johanna Sigurdardottir, a Social Democrat and a former stewardess, and the world’s first openly gay head of state, became prime minister. She pursued an agenda that included both bank reform and the banning of all strip clubs. But it was last May’s mayoral election in Reykjavik that proved to be the real litmus test of just how fed up people were with the government. One candidate was a comedian named Jon Gnarr, whose credentials included a stint on the radio in which he made prank calls to the White House, the C.I.A. and various police stations in the Bronx in search of his lost wallet. Initially, Gnarr’s campaign appeared to be a joke. He promised polar bears at the local zoo and a drug-free Parliament. Then he was elected.

I caught up with Gnarr one afternoon, and we took a stroll around a park in downtown Reykjavik. Gnarr, who is in his mid-40s and has a mop of red hair, was wearing a heavy wool sweater. As we walked, he talked about all the budget cuts he had to make, and how he was heckled recently while leaving City Hall. “They were shouting and booing at me,” Gnarr said. He looked genuinely hurt. I asked him if he ever second-guessed his decision to become mayor. He nodded and replied: “I have these moments when I’m like: What the hell was I thinking? I need to get the hell out of here!”

Gnarr said that the biggest issue facing Iceland right now was whether it should try to stabilize the economy by adopting the Euro. “People think that we should go to the Euro, but it doesn’t look cool,” Gnarr said. “The design has no charm to it. I don’t understand why we can’t just take up the dollar. The dollar is cool. It’s the dollar that you see in movies — it has the image.” I waited for Gnarr to smile, but he didn’t. “You could put the dollar on a CD album and it would be cool, but you couldn’t put a Euro on it — it would look silly.”

There are certain things you can do only in a nation as small as Iceland; for instance, I wanted to visit a bank, so I contacted Asgeir Jonsson, the chief economist at the nation’s largest bank, and asked if I could swing by later in the day.

No problem, he said.

Arion Bank is made up of the domestic assets from the former Kaupthing Bank. Its headquarters are magnificent. Walls of sun-drenched windows enclose a soaring atrium; smack in the middle, a waterfall cascades down a towering, free-standing slab of glass. There is also a small espresso bar. It is, or was, the kind of building that inspires supreme confidence. I finally understood why the young Icelandic women I met had been high-fiving one another. The only sign that there was anything awry was that the place was more or less deserted. During the boom years, Kaupthing was an international bank — with 70 percent of its assets held by its overseas branches. When Iceland’s banks defaulted on their bonds, however, Iceland lost access to international capital. Iceland is now, in effect, a banking pariah; in April, Icelanders only reinforced this dynamic when they voted against a measure to guarantee payments to Britain and the Netherlands for the billions of dollars that their citizens lost when the banks in Iceland failed. Britain and the Netherlands are now suing Iceland in the court of the European Free Trade Association. “It’s doubtful that this will cripple the Icelandic economy,” says Zoega, the economics professor, “because Iceland would likely only have to pay a portion of what its banks actually owed.”

Jonsson met me in the lobby and led me through a maze of glass corridors until we reached a small meeting room. Jonsson wore a tight black suit and had the shaggy blond beard of a sea captain. He explained that he had been at the bank since 2004, through the boom and the crash, and as it turned out, that very day he was packing up his office. He had taken a job at the University of Iceland’s economics department. “I’m haunted by the memories both of the bubble and the collapse,” he told me. “It is better basically to start anew.” Jonsson looked melancholy. “I analyzed the two other Icelandic banks, but I was unable to analyze my own bank,” he confessed. “I was psychologically unable to admit that we were doomed.”

I asked Jonsson what it was like in the old days, before the crash, when business was good. “I was the chief economist for the bank — I was on the news, and I was known,” he said. “It was very cool to be a banker — now it is very uncool.”