Posted on 04/02/2015 7:10:35 PM PDT by aMorePerfectUnion
Who knew that the revolution would start with those radical Icelanders? It does, though. One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report today 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 Looks At Ending Boom And Bust With Radical Money Plan
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.
Please don't miss the importance of this at this time in history.
Makes ‘create money’ when they make loans.
So the banks in Iceland won’t be making any loans? In that case, they don’t need to take deposits.
Maybe they can just issue credit cards and charge fees?
So now the government is going to control any kind of loan, and will know all sorts of stuff about your finances. Lovely.
Welcome the Greek-Icelandic Axis.
I’ll have to wait for someone I trust to explain this to me. This financial world bank stuff makes my head spin.
“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.”
Your point is not what the article said. Our central bank, the privately held “federal reserve” has always had that power, printing fiat money then charging interest on it. How does that change anything in the case of Iceland?
They USA can not fix itself - economically or socially - until the Federal Reserve is ended.
The Fed is the foundation of progressive plans for government. Until its ended, conservatives will lose every political battle.
Just an aside, the guy’s name is Frosti.
Excellent idea!
If you want to take out a loan, parliament has to vote to give it to you.....or not.
is now planning to take the power of printing money away from bankers.
Bankers don't print money. They take deposits and loan out a portion of them.
The crooks at the bank or the crooks at the government.
They loan out many times the amount of deposited money.
Thus creating money out of nothing.
Nice work if you can get it.
But you knew that already.
As old Hickory Stick would say: they are a den of vipers
Not exactly. They take deposits and loan out a multiple of them.
In the US the reserve requirements range from 3% to 10%. So the money lent is 10x to 30x that deposited.
Or something like that. I really don't understand this stuff.
But is giving this power to the central government any kind of solution?
They take deposits and loan out a portion of them. ???
You should study how our monetary system really works, NO DEPOSITS are EVER Loaned, All Loans are funded with Freshly Created Credit, thereby diminishing the value of all existing specie on a constant basis, some call it “inflation”, Honest people call it Theft.
Old Hickory of course destroyed the Bank of the United States, depositing government funds in private pet banks as one of the first major examples of crony capitalism in our history. A major cause of the Panic of 1837, with a severe depression lasting into the mid-40s.
In the US the reserve requirements range from 3% to 10%. So the money lent is 10x to 30x that deposited.
LOL, nice work if you can get it.
Imagine having ten bucks and being able to loan out $300 in credit to other people while charging them interest on that imaginary money.
And then having cops come and arrest them for theft if they don't pay you back all of your imaginary money, plus interest, in real money.
That's literally what banks do.
So the message is it’s better to trust the government and politicians, than bankers. I don’t think that’s going to solve the problem.
Okey, dokey. So what happens when banks can only loan deposits, or possibly a fraction of them? Suddenly the amount of money available for loans is only 10% (or considerably less) of what’s available now.
What do YOU think that would do to the economy?
That is, BTW, where banking was stuck for thousands of years. Only with the early modern period and the development of the modern banking systems you hate did the world start climbing out of its previous level of poverty.
But we can go back to that if it pisses you off so much that its unfair for banks to loan more money than in their deposits.
Isn't privately held.
has always had that power, printing fiat money then charging interest on it.
The Fed doesn't lend FRNs to anyone. How would they charge interest on it?
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