Iceland Plans To Create Its Own Money

Iceland Plans To Create Its Own Money

Iceland was certainly up for jailing their bankers, will they now get away with creating their own money?

The government of Iceland is considering removing the power of commercial banks to create money and handing it to the central bank.

Can’t see commercial banks in the western world being too happy with this somehow.

Blacklisted News reports:

Back in 1914, the Bradbury Pound was introduced by the UK government as an ’emergency measure’ to bolster a failing economy.

It was a huge success. The banking elite were unhappy, however and panicked – before managing to wrestle control of the money supply afterwards.

President John F. Kennedy also introduced a similar ‘Greenback’ in 1961, and again, the banking elite were very unhappy about being pushed out, and losing control of the issuance of money as debt. JFK did not survive past 1963.

Then there was Muammar al-Gaddafi in Libya who, in 2009 announced a new gold-backed dinar, issued by Libya’s state-owned public central bank, and with further plans – negotiating with the other African nations for the creation of an all-African currency to compete with the Euro and the Dollar. Gaddafi did not survive past 2011.

Who knew that the revolution would start with those radical Icelanders?

One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report that suggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament.

Can’t see commercial banks in the western world be too happy with this. They must be contemplating wiping the island nation off the map. If accepted in the Iceland parliament, the plan would change the game in a very radical way.

It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with.

Everyone, with the possible exception of Paul Krugman, understands why this is a very sound idea. Agence France Presse reports:

Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank.

The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled “A better monetary system for Iceland”.

“The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy,” Prime Minister Sigmundur David Gunnlaugsson said.

The report, commissioned by the premier, is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008.

According to a study by four central bankers, the country has had “over 20 instances of financial crises of different types” since 1875, with “six serious multiple financial crisis episodes occurring every 15 years on average.”

Mr Sigurjonsson said the problem each time arose from ballooning credit during a strong economic cycle.

He argued the central bank was unable to contain the credit boom, allowing inflation to rise and sparking exaggerated risk-taking and speculation, the threat of bank collapse and costly state interventions.

In Iceland, as in other modern market economies, the central bank controls the creation of banknotes and coins but not the creation of all money, which occurs as soon as a commercial bank offers a line of credit. The central bank can only try to influence the money supply with its monetary policy tools.

Under the so-called Sovereign Money proposal, the country’s central bank would become the only creator of money.

“Crucially, the power to create money is kept separate from the power to decide how that new money is used,” Mr Sigurjonsson wrote in the proposal.

“As with the state budget, the parliament will debate the government’s proposal for allocation of new money,” he wrote.
Banks would continue to manage accounts and payments, and would serve as intermediaries between savers and lenders.

Mr Sigurjonsson, a businessman and economist, was one of the masterminds behind Iceland’s household debt relief programme launched in May 2014 and aimed at helping the many Icelanders whose finances were strangled by inflation-indexed mortgages signed before the 2008 financial crisis.

Iceland's president

 

  • http://www.paulglover.org/ metroeco

    The book “Hometown Money” explains how to start local and regional currency. By the founder of Ithaca HOURS. http://www.paulglover.org/books.html

  • tool_guy

    This is not that radical an idea unless modern finance only refers to the last quarter of the last century plus the first 16 years of this century. Prior to the 70s most of the central banks created a portion of the money supply. In Canada it was about 20% depending on the year and the state of the economy.

  • Bearzerker

    If we peg the dollar to your countries gdp and regulate its control through a centralized governmental bank… we can be what our fathers dreamed of us to bevone… Kenyisan economic model worked for them from 1931 to 1973 until central bankers finally took back control siting inflation as the main concern…

    Having a central bank helped us get to the moon and back, helped us win ww2 and helped us developed into a thriving bastion of possiblities… time to revisit this possibility once again.

  • http://www.historiclakes.org/saratoga/saratoga.htm Tom LaMar

    Yes, Hooray for Iceland to realize that as Ben Franklin, Abe Lincoln and JFK/RFK showed us, debt-free money is the way to go….as long as it is REGULATED properly, and as I would prefer, our states would use their 10th powers to that end so the feds couldn’t over/underprint so there would be little to no inflation/deflation…and such a constant currency would attract business again, instead of having to deal with the vagaries of the “open markets”, derivatives, bank bailouts, etc. and prosperity would return…because…..since LABOR would then back the currency ultimately as it has in the USA since Nixon took us off gold (a false paradigm/control freak thingy to begin with), our monetary system has been based on labor…in the form of TAXES as in servicing our mostly counterfeited “national debt”…about which the real game being played out is not the YUUGE principal, but the never ending INTEREST at about $ 400 Billion/year ! which will END with sovereign, debt-free, currency ! Good luck !

  • Clive

    What do you mean “will they now get away with creating their own money” a sovereign Country can create it’s own money. Go listen to this https://www.youtube.com/watch?v=IP4BOqDEWXg Iceland is leading the way.