“Fundamental reform of the monetary system must be considered.” Says head of Iceland Parliament’s Committee for Economic Affairs
Frosti Sigurjonsson, Member of the Parliament of Iceland and Chairman of the Committee for Economic Affairs and Trade, today published a report outlining the need for a fundamental reform of Iceland’s monetary system.
The report, commissioned by the Prime Minister, considers the extent to which Iceland’s history of economic instability has been driven by the ability of banks to ‘create money’ in the process of lending.
The Icelandic economy has struggled with inflation and unstable exchange rates. Iceland also suffered one of the costliest banking crises in history.
The report describes how commercial banks in Iceland created far more money than was needed for economic growth. The Central Bank failed to bring the money supply under control using conventional means.
The report considers various reform proposals and concludes that the Sovereign Money proposal could provide a sound basis for effective reform in Iceland.
According to the Sovereign Money proposal, the state owned Central Bank would become the only creator of money in the economy. Furthermore, the power to allocate money would be separated from the power to create new money. The Central Bank would handle creation of money while Parliament would vote on how new money is allocated. The proposal aims to reduce the risk and instability of the monetary system, reduce debts substantially and direct the income from creating money to the state instead of commercial banks.
Further study is needed before Iceland can decide weather to take steps to implement reforms based on a ‘sovereign money’ system.
In his foreword to the report, Lord Adair Turner, former chairman of the UK Financial Services Authority and chair of the policy development committee of the international Financial Stability Board, said of efforts to make the existing financial system more stable: “have still failed to address the fundamental issue – the ability of banks to create credit, money and purchasing power, and the instability which inevitably follows. As a result, the reforms agreed to date still leave the world dangerously vulnerable to future financial and economic instability.”
The prime minister of Iceland Sigmundur David Sigmundsson, said: “I am very pleased to receive this new report on monetary reform. The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy.”
Frosti Sigurjonsson MP, author of the report, said: “Iceland, being a sovereign state with an independent currency, is free to abandon the present unstable fractional reserves system and implement a better monetary system. Such an initiative must however rest on further study of the alternatives and a widespread consensus on the urgency for reform.”
The full report can be downloaded here.
http://www.positivemoney.org/2015/04/iceland-fundamental-reform-monetary-system-must-considered/
I recommend that Frosti Sigurjonsson and all of the other members of Iceland’s Parliament study the following blog post published by the Center for Economic and Social Justice (www.cesj.org):
A (Very) Short Discourse on Interest
It’s appropriate that we take a look at interest today, because the way interest rates have been manipulated in modern times is one of the biggest April Fool pranks in history. Since the invention of central banking in 1694 with the institution of the Bank of England, the public has been mulcted by having to pay interest on the loan of “pure credit” (i.e., not based on past savings) money.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Central Banking, Interest Free Money, Usury
Tuesday, March 31, 2015
A Few MORE Capital Homesteading Monetary Reforms
Yesterday we looked at one or two things that should be done to return the Federal Reserve system (or any central bank, for that matter) to its original purpose of providing adequate liquidity for private sector development for qualified agricultural, commercial, and industrial projects. Note that financing government was not one of the original purposes for which central banks were invented. It just turned out that way due to an accident of history . . . if by “accident” you mean “expedient for those wielding political power and who could withhold a charter unless their terms were met.”
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Capital Homesteading, Central Banking, money and credit
Monday, March 30, 2015
A Few Capital Homesteading Monetary Reforms
Hokey doke, we’ve come to the conclusion that the Federal Reserve system, the central bank of the United States, needs a few tweaks to put it back on the rails and conform to the purpose for which it was originally intended: provide liquidity for private sector growth. Yes, there’s some stuff about regulating clearinghouse operations and so on, but the main purpose was to make certain that the private sector would always have “accommodation” for qualified industrial, commercial, and agricultural development, not finance government.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: binary economics, Capital Credit Insurance, Capital Homesteading, Louis Kelso, money and credit
Don’t Put the Horse Before the Cart
Okay, we’ve been looking at money (looking at money you don’t have is much better than spending money you don’t have, trust us), and the key role it must play in the restructuring of the economy to empower people to take back their lives, liberties, and property, and run things for themselves, instead of for the benefit of an élite, or to conform to whatever weird idea has seized those who want to run the world for our own good.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Capital Homesteading, Central Banking, money and credit
Wednesday, March 25, 2015
Why Focus on the Federal Reserve?
Not naming names (YOU know who you are. . . .), but some people have accused the Federal Reserve of being the source of many of our economic ills. While that might be the case, it can also be the source of the cure. Of course, the real problem is how the institution is misused, not the institution itself, but if you haven’t gotten that straight by now, well, just assume it’s the case and read on.
Posted by Michael D. Greaney at 8:01 AM 1 comments
Topics: Banking, binary economics, Central Banking, Federal Reserve, Just Third Way, money and credit
Tuesday, March 24, 2015
How to Restore an Asset-Backed Reserve Currency
In recent postings we’ve seen what can happen when an economy shifts from a uniform and stable asset-backed reserve currency, to one that is worth what the government says (or hopes) it is worth, and changes the standard to meet political needs, for short-term expedience, or just for the heck of it.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Capital Homesteading, Central Banking, money and credit
Monday, March 23, 2015
What Happens When the Central Bank is Misused
Last week we looked at what a central bank is, and what it’s supposed to do. Today we’re going to take a short look at how the whole reason for having a central bank in the first place has been diverted to serve political interests. No wonder some people say the Federal Reserve ought to be abolished and the government just print the money it needs directly instead of fattening the purses of brokers whose only purpose is to turn the primary issuances that the Federal Reserve isn’t permitted to deal in, into secondary issuances by holding them for a microsecond.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Central Banking, Just Third Way, money and credit
An Untapped Source for Private Sector Growth
Yesterday we asked the question on everyone’s lips. That is, besides, “What’s for lunch?” (What you didn’t eat for dinner, of course.) And that is, what should the Federal Reserve system be doing? Financing government? No. Financing private sector growth.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Central Banking, money and credit
Wednesday, March 18, 2015
What Is a Central Bank NOT Supposed to Do?
Yesterday we looked at what central banks were designed and intended to do. Today we look at what central banks have been diverted or hijacked into doing, i.e., shifted from providing an elastic, asset-backed reserve currency to finance the private sector by supplying liquidity for qualified agricultural, commercial, and industrial purposes, to providing virtually unlimited financing for government using an elastic, debt-backed currency to expand the power of the State.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Central Banking, Just Third Way, money and credit
Tuesday, March 17, 2015
What Is a Central Bank Supposed to Do?
Happy Saint Patrick’s Day. We won’t be wearing green on the blog today, but we will be talking about it. Long green, that is: money. Admittedly, that’s a pretty clumsy way of segueing into our subject, but they can’t all be smooth . . . which doesn’t detract from the importance of what we’re talking about.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: binary economics, Central Banking, money and credit, Real Bills doctrine
Monday, March 16, 2015
What is Money?
Did you read the Wall Street Journal this morning? Of course you did/didn’t. Want to know something? The people who write those front-page articles and the back page articles (and all the ones in between) for the world’s most important financial newspaper have a slight gap in their knowledge. They don’t know what money is.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: Banking, binary economics, Capital Homesteading, Central Banking, Louis Kelso, money and credit
You Asked. Kelso Answered
Things do seem a little bad in economic terms these days. A few days ago in the Washington Post, Robert J. Samuelson criticized the “Fed Bashers,” i.e., people who want to shut down the Federal Reserve. He was right in that the Federal Reserve is critical. Unfortunately, this gives the impression that what the Federal Reserve is doing is fine and dandy — which we know is not the case. As it is presently used, it represents a serious threat to economic growth and stability.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: binary economics, Capital Homesteading, Louis Kelso, money and credit
Wednesday, March 11, 2015
Past Savings and Pure Credit
The stock market is booming (except for that eentsy little drop yesterday … good for the short sellers) … but why does the economy seem so bad away from Wall Street? It might be because a critical tenet of Louis O. Kelso’s binary economics is that the purpose of production is consumption. Within the logic of the Kelsonian economic system, all income (particularly income produced by capital), should be spent for consumption, instead of saving it for reinvestment and using it to increase capital gains (which traditionally have been accorded more favorable tax treatment than dividends).
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: binary economics, Capital Homesteading, Keynesian Economics, Moulton
Tuesday, March 10, 2015
Financing Private Sector Growth Under Capital Homesteading
According to today’s Wall Street Journal, the European Central Bank is “betting big” on stimulus, i.e., print enough money, and Something Good will happen. Add to that all the uproar over the Federal Reserve recently, and we decided to start taking a look at money and credit. In The Formation of Capital (Harold G. Moulton, The Formation of Capital, Washington, D.C.: The Brookings Institution, 1935), Dr. Harold G. Moulton, president of the Brookings Institution, presented the theoretical foundation for the monetary reforms advocated under Capital Homesteading. Moulton pointed out that economic growth does not depend exclusively on past (accumulated) savings. There need not be a tradeoff between expanded consumption and expanded investment.
Posted by Michael D. Greaney at 6:00 AM 0 comments
Topics: binary economics, Capital Homesteading, Keynesian Economics, Moulton
