Iceland Stuns Banks: Plans To Take Back The Power To Create Money

Tyler Durden's picture

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

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.

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Iceland Monetary Reform

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ghostzapper's picture

Cabal goons landing at Reykjavik International and linking up with nailguns in 10, 9, 8, 7 . . . . . . . . . 

Sonic the porcupine's picture

So instead of idiots in commercial banks creating money. We have idiots in parliment creating money. Forget going back to commodity money, that's just crazy!

2handband's picture

Don't be so quick to naysay. Hitler did this, and it turned the German economy completely around. It also got his regime expunged from the face of the earth.

Pinto Currency's picture

 

 

This is not sound money.

Central planning is the issue.

Deathrips's picture

If they boot the central bank..ill be impressed.

If they back the currency fully with metals (silver and gold) ....then we are on to somthing.

RIPS

Thirst Mutilator's picture

Who needs silver & gold when there's BITCOIN? ~ LOL

macholatte's picture

 

 

Bill Still Report

 

In the 6th segment of last November's Money Creation Debate in the British Parliament, we hear from Michael Meacher.

 "The banks have too much power"

SR 366 Money Creation Debate 6

https://www.youtube.com/watch?v=tq51BT5SPWM&list=TLfoTG5YMxXpA

 

Divine Wind's picture

 

 

 

LOL.

100:1 we see al Qaeda pop up in Iceland, followed by a civil war and new government installed.

exi1ed0ne's picture

I love AU and AG as much as any conspiracy nutter, but just yanking back money creation from central banks is a huge step forward.  Besides, I'd be very concerned if we started backing with gold and silver - two of the most heavily manipulated elements on the planet.  Doing so at this early stage of revolution and you might as well as keep all value decisions on what your money is worth with the big banks.

lordylord's picture

"gold and silver - two of the most heavily manipulated elements on the planet"

Mine still has the same number of protons and neutrons as it always did.

Deathrips's picture

Lordy lord...funny. Mine too....Cheers.

 

Exiled

"as much as any conspiracy nutter" Fuck you!

You still think people who claim the world is round are conspiracy nutters too?

Fuck wealth extracting Central Banks and Fuck Fiat.

How would these bankers control an object they own none of ...like silver? So you prophetize that they will be there telling me what i can and cant use for commerce ..when they are trying to figure out why no one wants their paper? They are impotent on a local level. Especially in countries with armed populaces.

 

You need to rethink your position before you are exiled even further. Fair warning.

 

There's maybe a quadrillion grains of sand on earth....maybe..... your dollar is worth less than sand when the music stops.

 

I don't remember saying to fractionalize anything... or to use paper promises? It is Wednesday..right?

 

RIPS

logicalman's picture

Given the price of metals is almost always quoted in US dollars and is, in fact, mostly paper, to back a currency with either of them would symbolic, but still tied to the US dollar because of the way it is 'valued'.

I think that was the point.

exi1ed0ne's picture

Holy shit you're funny.  Come get me internet hero that doesn't grasp self depreciating humor or common logic.  Its a shame you don't put that vitrol to good use rather than squander it on an internet forum for fake points.

 

exi1ed0ne's picture

So does mine.  Too bad international trade isn't dependent on neutron counts, but on agreed upon international value of thing A vs thing B.  If I can set the price of gold, I in effect control your economy if that is what your currency is linked to.  100 paper oz per 1 physical oz can just as easily become 200 putting your purchasing power in the toilet any time I want.

Deathrips's picture

To run a ponzi you have to have something to hand out, now that is mostly dollars and paper commodities. The game of price controls ends when there is no physical asset to deliver in exchange for contract or dollar. See Venezuela toilet paper.

The point is that if a country backs they could buy up 50 or 100 Billion USD or other currency equivalent in metals, supply dries up. Imagine 3 or 4 countries doing the same and not selling reserves for dollars. Think about what that would do to the supply side.

Fuck Dollars, I know. The second people realize that grains of sand on earth are more rare than dollars it may change. Ultimately the decision lies with the people, not the banks.

Quit talking like the defeated and wipe your sandy pussy off.

 

RIPS

SumSUN's picture

I think you have a good point exiled.

JPM still controls the price of many commodities.  

Deathrips's picture

JPM and Co control the price of everything as long as the people play their game.

Thats my point.

 

RIPS

Kirk2NCC1701's picture

"Central planning is the issue."

BS! The real issue is... Perpetual Control via Perpetual Debt.

Best done within a feudal system of Heritable Entitlement of Rent and Taxes in perpetuity, to allow for Income + Lifestyle in Perpetuity for its Masters. Period.

And THAT is why moneychangers LOVE the aristocracy and support dictatorial monarchs (Shah, The Queen, Saudis), but not a dictator who is a commoner (Castro, Gaddafi, Saddam Hussein...). The true "ruthlessness" of the latter group is in their ruthless opposition to Usury.

luckylongshot's picture

If you study history the closest humanity has come to sound money was the Tally system that operated in England for 500 years and took a bankster funded invasion to finish. The key to its success was not that was backed by a commodity but that it waas not debt and did not have interest attached. This is the same sort of money that has enabled China to become the world's biggest economy and it only works when it is issued by Governments as the banksters always want usury linked to loans.

Ghordius's picture

luckylongshot, +1 for mentioning the tally system. nevertheless, a tally stick is an IOU. specifically, one part is the IOU and the other is the receipt

so it was "debt money". specifically, one of the oldest system, most probably older then all the others, including PMs

the key ingredient of the tally stick system was that people created debt without banking system assistance

Peter Pan's picture

You need to read a little further as what you have said is not correct. Sure everyone was working but not for their benefit.

SeattleBruce's picture

"It also got his [Hitler's] regime expunged from the face of the earth."

Pretty sure that was because of the whole Arian race/blitzkrieg/world war thing.

Icelandicsaga...............................................'s picture

You miss the point Bruce .. in a big way ...

SeattleBruce's picture

Look the monetary freedom may have facilitated and empowered them to be able to war, but they chose to war and commit superior race crap crimes with that freedom.  Let's try sound money again with some decent people this time, shall we?

luckylongshot's picture

You need to check your facts Bruce. Churchill went on record as saying the reason for WW2 was that Germany denied the (parasitic) private banksters the right to share in Germanys economic growth through issuing government money.

layman_please's picture

for christ sake. just check the amount of loans you americans made to germany and hitler. mystery solved!

Harbanger's picture

"Don't be so quick to naysay. Hitler did this, and it turned the German economy completely around"

Here's something to read if you believe in real currency vs unicorn stories

Hitler’s Finances and the Myth of Nazi Anti-Usury Activism

https://realcurrencies.wordpress.com/2013/09/16/hitlers-finances-and-the...

 

Hot Shakedown's picture

Damn straight - and you will not see this fact on MSM or in little Johnny 's history class in public school. Thanks to who?

s2man's picture

Yeah.  They failed at "money creation".

giggler321's picture

One things for sure - they'll start to offer much better rates for saver when they can't simply create it...

Harbanger's picture

"Commodity based money" would not allow the people in charge to create new money on demand.  It's just a power play between banks and gov. to see who gets to create more unbacked fiat.

Lost My Shorts's picture

Yes, and politicians are very reliable stewards of the paper money supply.  Need to fund another war, or to buy some votes -- no prob; create some money !!

Mugabe was big on sovereign money too.

 

WhackoWarner's picture

Yeah.  Iceland is such a war focused nation.

Iceland my hero for contemplating step #2 (since they already took step 1)....  but only if their Central Bank of Iceland is not privately owned or run by Goldman, the Morgue or any of that pedigree.

logicalman's picture

With a population of just over 300,000, Icelandic politics are bound to be kinda 'local' in nature.

The people know where the pols live, that's why the cahnges came about.

People surrunded the homes of the politicians and bankers and banged pots and pans through the night.

Nobody was hurt, but a very strong message was sent.

They also only have about 200 cops per 100,000 and are armed with pepper spray and a baton.

I think they had the first ever police killing a couple of years ago.

 

samsara's picture

I was going to post something similar.  One of the MAIN reasons that it will work is because Everybody Knows Everybody.

You points about banging pots and pans is exactly right.  You won't hear that SWAT teams were called to disband the Rabble Rousers away from the 'Elite' neighborhood...

Everybody knows and lives in the Same neighborhood as everyone else.

Icelandicsaga...............................................'s picture

Let me know last time Iceland went to war with anyone .. what is wrong with you naysayers. jealous of the fact that US does nothing . zip . zero . nada .. they can not even do tax reform let alone attempt currency reform .. must like the Fed system .. its a hag bitch but its your hag bitch..... dásamlegt dæmi um heim

Kirk2NCC1701's picture

"Habanger of shhh", re... "Commodity based money"

Not sure how you define this, but since goods and services come into existence via Resources/Commodities + Energy + Labor + Capital*, it is logical to have Money indexed (strongly coupled) to all of these. Perhaps a linkage of 20-50% to Resources+Energy makes sense, as it allows for limited elasticity that comes about with economic cycles (when money supply expands or shrinks with the biz cycle).

* I'd define Capital as "Equity stored as Money, from goods & services built from previous economic transactions"

froze25's picture

The bank of North Dakota has the right idea, lend to sound people and companies and use the intrest to finance public works.  No need for taxes.

Kirk2NCC1701's picture

Lemme see if I got this...

In N.Dakota the public works project are paid by successful workers and businesses, and everyone else gets a free ride?

Sounds like Communism.

Ghordius's picture

Kirk, there is a problem with your definition. "Capital as "Equity stored as Money, from goods & services built from previous economic transactions"

true capital is not money. it's a machine, a factory, or a cow that produces milk, or even a husband that goes every day to work (for his family), or a bright idea being applied

true capital is productive. money is only potential capital. you are confusing production with wealth, the real economy with the financial side of it (not junked you, btw)

Legolas's picture

Theoretically, the politicians will still be accountable to the populace.  Banks won't own the politicians.  Couldn't be any worse than unaccountable creation/supply entities owning/bribing the politicians.

 

Bottom line is that, in the absense of trust, nothing will work.  And trust ultimately requires agreed to subscription to moral standards. 

disabledvet's picture

Will interest be paid on the savings?

Is 4% too much to ask?

 

I understand there is a terrible threat from "the Greenlanders" and invasion could come at any moment...still, 4% on "free money" doesn't sound bad to me.

 

Morgan had the gold AND the interest back in the day.

 

Would appear we are all still stuck with "economics" here.

 

Bjork's been rockin it of late apparently.

Groundhog Day's picture

All i know is someone is gonna get whacked

WhackoWarner's picture

Iceland is proposing (on my very limited reading of this)  much the same as the COMER lawsuit in Canada is claiming:  They filed an amended claim that more or less says "throw out the private bankers"

Bear with me, as I think most formerly democratic nations have this enshrined somewhere (and ignored):

 Tried to paste it in but failed.  Amended claim regarding Bank of Canada.

 

http://www.comer.org/content/AmendedClaimStatement26Mar2015.pdf

 

WhackoWarner's picture

And actually I am less than informative here.  Reading through the amended claim  there is the assertion that of all the G8 countries, Canada is the only one whose central bank is "public" in creation and not private.  (read US, UK)

See amended statement item #6.

 

Canada wake up.  In my limited view I am all behind COMER and Iceland.  Iceland defied the private bankers and IMF once.  They then made overtures to Canada regarding using the loonie as currency...wonder why?  Maybe some smart kid there saw the constitutional establishment of Bank of Canada beyond private interests as desireable.

 

But I am an idiot so what do I know.

Urban Redneck's picture

The central bank of Iceland must be suffering:

1) brain freeze

2) Lessons in logic from Jacob "showering after sex prevents HIV" Zuma

3) Banker Syndrome aka "We want MOAR!"

In a vacuum it seems like it might a good idea, ceteris paribus.  But nothing is ever equal, and Iceland's finances doesn't exist in a vacuum.  In a perfect world central banking would seek equilibrium pricing of their currency, with money supply and interest rates as the primary levers to manipulate the supply and demand curves respectively to maintain stability net of the balance of domestic and foreign trade... If the idea were to catch on in other countries AND central banks were to start acting in the best interests of their natural citizens, as opposed to corporate citizens, then there might be a risk to the banker world order.  However, without the second caveat- all you have is the Dick Fisher "feel good" solution to the FED's evils, just as without actual countercyclicality one only has Krugmanism masquerading as Keynesianism...

Ghordius's picture

+1 

"If the idea were to catch on in other countries AND central banks were to start acting in the best interests of their natural citizens, as opposed to corporate citizens, then there might be a risk to the banker world order"

"...Krugmanism masquerading as Keynesianism..."

Urban Redneck's picture

In general, corporate persons have no use for savings since they are focused on strictly on investment, when they aren't simply rerouting excess cash flow to investors, and they are wholey dependent upon the consumption of their customers to drive those cash flows.  It leads to a really warped perspective on what a normal economy should be, hence Dick Fisher and his buddy the CEO of Southwest Airlines and their divergent perspectives and interests from Southwest's customers (as long as Southwest's customers keep buying MOAR tickets, even if they have to go into debt and obliterate their savings to do so, then unicorns are shitting skittles and everything is great). 

Ghordius's picture

+1 excellent add-on. at the end, it works like a subsidy. the first impact is "beneficial", and then it... ebbs. but if you keep "pumping it", you just create a dependency

this conundrum is real in many human matters, from monetary to fiscal to even the way people raise children

doctor10's picture

they'll be needing a good dose of FREEDOM!! if they go through with this.