Iceland Is Fighting the Banks but Could Do Better

Though they would do better with a sound monetary theory, it is great that SOMEONE is fighting the banks!

The Daily Bell has a great piece out, “Iceland vs Banksters.”

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”. 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. – Agence France-Presse via London Telegraph, March 31, 2015

Tiny Iceland, best known for its volcanos, seafood and tongue-twisting language, is thinking big. The government is apparently taking seriously a proposal that could shake the global banking system to its core.

When it comes to having civil leaders who think outside the box regarding modern banking, I really appreciate Iceland. They were the only nation, to my knowledge, who told the major banks to go pound sand during the collapse of 2008-09, rather than plundering taxpayers to reward the robber-bankers who created the mess (with the help of their lackeys in governments all over the globe).

[See also, “Iceland’s Political-Economy: The Good, The Ugly, & The Inconsistent.”]

As the author of this essay notes, Frosti Sigurjonsson’s suggestion does not go all the way to a truly sound and moral position on economics and banking, but it would provide a wonderful first-step. Taking away the banks’ ability to counterfeit money (which is exactly what they do when they extend loans in the current system) would strip “the banksters” of many ill-gotten and unearned gains.

The real flaw [in the Icelandic proposal] is the assumption that someone [in this case, the nation’s Central Bank] should control the money supply. No. Money isn’t money if some earthly creature can create more of it ex nihilo. That power is not safe in human hands. Natural scarcity is an essential element of money.

No doubt the bankers who own too many of Iceland’s politicians (similar to the case in the United States) will pull every string to defeat this idea, but it’s at least encouraging to see such thinking actually make it to the floor for debate.