DAILY BUSINESS REPORT - Financial Updates, International Markets and Business News
April 8, 2015
Iceland Considers Stripping Power to Create Currency From Banks
Still reeling from the economic catastrophe that struck in 2008, Iceland and its Parliament are debating a plan that would dramatically restructure the tiny nation’s monetary system by stripping commercial banks of the legal ability to create currency out of thin air — and handing that power exclusively to politicians and central bankers under what is being labelled a “sovereign money” system. The proposal to quash private bankers’ fractional-reserve system, where banks literally bring new currency into existence with government permission and then charge interest on it, is already making major waves. It is being described by analysts as everything from “radical” and “revolutionary” to a prescription for “an almost Soviet-style banking system.” Either way, the implications of the debate are enormous.
In a parliamentary report released on March 31, commissioned by the prime minister about the monetary idea, Chairman Frosti Sigurjónsson on Parliament’s Committee for Economic Affairs and Trade suggested that a “fundamental reform” of Iceland’s monetary system was needed. “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,” explained MP Frosti, who authored the report. “Such an initiative must however rest on further study of the alternatives and a widespread consensus on the urgency for reform.”
The explosive 110-page report, entitled “Monetary Reform: A Better Monetary System for Iceland,” offers a great deal of educational material on the inherent flaws of the current fractional-reserve banking system. In essence, with full government backing, the existing monetary system literally allows commercial banks to create fiat currency out of nothing, based on the amount of deposits held by the commercial bank. The banks then charge customers interest payments on the currency that they created out of nothing. Countless analysts have blasted the existing system as a scam and a fraud that serves mostly to loot the public.
Of course, The New American magazine has been attempting to raise awareness of this system for decades — along with the inherent instability it produces, as well as how it allows government-backed bankers to get rich at public expense. The Icelandic report, if nothing else, should serve as a valuable educational tool to create more widespread public understanding of the systemically flawed system now in place across virtually the entire globe. The parliamentary document itself acknowledges that education on the existing system is necessary if it is ever going to be seriously reformed.