What are Economists Saying About Iceland’s Sovereign Money Proposal?
A study recently commissioned by the Icelandic prime minister, Sigmundur Gunnlaugsson, and written by Frosti Sigurjonsson, displays an accurate analysis of how banks create money and endorses Sovereign Money proposals. But what are people saying about the report? Of course there are criticisms of the report and some of the usual misunderstandings, but most people think it’s a proposal that merits serious consideration.
Iceland’s Prime Minister Gunnlaugsson said:
“The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy.”
Economists at RBS released a note stating:
“The key idea is a new Sovereign Monetary System, where only the central bank is responsible for money creation. The idea makes sense…Separating the creation of money and allocation of money powers could safeguard against excessive credit creation, and reduce incentives for commercial banks to create more credit to make private gains…Iceland’s proposal is worth exploring.”
Lord Adair Turner, Former Chairman of the FSA, writes:
“It proposes a radical structural solution to the problems we face. The feasibility and merits of that specific solution need to be debated. But whatever the precise policies pursued, they must be grounded in the philosophy which this report proposes – that money creation is too important to be left to bankers alone.”
“Having decided against scrapping its currency, the government in Reykjavik now mulls a complete ban on its banks creating krona when they issue new loans…In recent years Scandinavian central bankers have shown the same dauntless appetite for exploration that once saw Nordic ships fan out across the globe. In this spirit Reykjavik should give sovereign money a shot. Nations far bigger and meaner than Iceland have struggled to come to grips with financial excess through conventional means. As well as showing other countries a potential way forward, by bringing the axe down on fractional reserve banking the Icelanders might just regain some control over their economic destiny.”
The Economist writes:
“Under the proposed sovereign money system, the Central Bank of Iceland would increase the money supply in proportion to growth and consistent with the mandated inflation target. Direct control of the money supply would remove the need for traditional policy instruments designed to manipulate commercial banks’ incentive to create money, such as policy interest rates and regulatory lending limits. The government would then put the money into circulation via sovereign bond purchases, and/or fiscal measures. To avoid conflicts of interests leading to the oversupply of money, decisions over allocation would be made by a committee independent of the government… If successful, Iceland’s experience could serve as an important case study for global monetary reform.”
For The FT Alphaville, Matthew Klein:
“Sigurjonsson’s plan for Iceland is an intriguing beginning that hopefully will lead to more debate about the future of the financial system. If implemented, it would dramatically improve the ability of central bankers to stabilise nominal spending without distorting the composition of economic activity.”
The Telegraph states:
“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…The key idea is a new Sovereign Monetary System, where only the central bank is responsible for money creation. The idea makes sense…Separating the creation of money and allocation of money powers could safeguard against excessive credit creation, and reduce incentives for commercial banks to create more credit to make private gains…Iceland’s proposal is worth exploring.”
Edward Hadas of Reuters wrote:
“Radical bank reform is mostly endorsed by academics, commentators and crackpots. So it is certainly worth taking note when a senior person in a real government calls for a top-to-bottom makeover of banks and the monetary system…Still, the Sigurjonsson plan is a plausible blueprint for better banking and Iceland is a good place to start. The population may be embittered enough to try something new and the established global powers of banking would probably tolerate an experiment in this miniature economy.”
Frosti Sigurjonsson, the MP who wrote the report stated:
“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.”
“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 new 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.”
“Concerns exist that if governments are allowed to create money directly, they will get carried away and create excessive amounts of money to pay for vote-winning projects. Under the democratic Sovereign Money System, however, the government is not allowed to create money directly. The decision to create new money would be made by a money creation committee, independent of government, on the basis of what is appropriate for the economy as a whole. The committee will not have the power to decide who benefits from its money creation or what new money will be used for. The allocation of new money will be decided democratically by parliament. In the current system however, commercial banks are allowed to both create money and decide what new money is used for. Also, banks are currently incentivized to create money based on what is best for their bottom line, but not on what is appropriate for the economy as a whole.” — A better monetary system for Iceland
Martin Wolf is widely considered to be one of the world’s most influential writers on economics. He is the associate editor and chief economics commentator at the Financial Times:
“One of these radical ideas was proposed by Martin Wolf in the Financial Times. He suggests stripping private banks of their remarkable power to create money out of thin air. Simply by issuing credit, they spawn between 95% and 97% of the money supply. If the state were to assert a monopoly on money creation [via public central bank], government could increase their money supply without increasing debt. Seigniorage (the difference between the cost of producing money and its value) would accrue to the state, adding billions to national coffers. Private commercial banks would be reduced to being servants, not masters, of economy.” — George Monbiot theguardian.com
Icelandic government suggests removing the power of commercial banks to create money out of thin air, and handing it over to the national public central bank
Agence France Presse, 31 Mar 2015
Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the public 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 public 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.
The small Nordic country was hit hard as the crash of US investment bank Lehman Brothers caused the collapse of its three largest banks. Iceland then became the first western European nation in 25 years to appeal to the International Monetary Fund to save its battered economy. Its GDP fell by 5.1pc in 2009 and 3.1pc in 2010 before it started rising again.
“The presumption was that borrowing from a central bank with the power to create money on its books would inflate the money supply and prices. Borrowing from private creditors, on the other hand, was considered not to be inflationary, since it involved the recycling of pre-existing money. What the bankers did not reveal, although they had long known it themselves, was that private banks create the money they lend just as public banks do — out of thin air. The difference is simply that a national public central bank returns the interest to the government and the People of the country, while private banks siphon the principal plus interest into their capital account, to be re-loaned at further interest, progressively drawing money out of the productive economy.”
Icelandic officials are thinking about redefining money and ending banking as we know it, Agence France-Presse reports.
Iceland’s prime minister commissioned a report from Frosti Sigurjónsson, a parliamentarian, that argues banks shouldn’t have the power to create money. It sounds strange to say it, but creating money is indeed something that banks do all the time. Say you take out a loan to start a business from your bank. You write checks to your workers and your rent and you buy goods wholesale. Eventually, your suppliers and employees deposit that money at their banks, which can in turn make new loans. One of those banks might extend a mortgage to help someone buy a house, and the cycle repeats.
As the checks change hands, the total amount of money out there actually multiplies with each cycle. Even though the homeowner has paid for the house she’s now living in, your employee can still withdraw her cash from her bank account. And although you have money to pay all your expenses at your business, your bank’s depositors can still take out their money as well. Money has been created.
Sigurjónsson’s report argues that this system is unstable. And it is. If the homeowner defaults on her debts — as many of them did during the years before and during the financial crisis — then the entire system is in trouble. The banks have promised to take care of people’s money, and they find they can’t keep their promises.
Sigurjónsson argues instead for a system in which the government would essentially run checking and savings accounts. No bank would be able to make a loan without taking the money out of some other account ahead of time, so instead of multiplying with each cycle of borrowing and saving, the money in this kind of system would just move around from place to place. The central bank would be entirely responsible for creating new money for people to use as the economy expands. In the current system, the central bank shares that responsibility with banks.
If the central bank was concerned about a bubble forming, about people making unsound loans, policymakers could easily tighten the spigot of new money. Everyone else would be forced to carefully examine about their lending and borrowing.
On the other hand, it’s far from clear that the system Sigurjónsson argues for, sometimes called “sovereign money,” would be more stable. Central bankers can make mistakes just as easily as private bankers can. They might be reluctant to deflate bubbles if things seem to be going well outwardly, and they might respond too slowly in a crisis. Of course, these are problems with the existing banking system as well, but they’d be exaggerated under sovereign money.
“You essentially don’t have a banking system. You would have, actually, an almost Soviet-style banking system,” said Ted Truman, a former Federal Reserve economist. “It’s a monobank, in the terms of Russia, the former Soviet Union.”
Truman argued that Icelandic officials risked drawing the wrong lesson from the country’s recent financial travails. In his view, it wasn’t that the central bank needed more authority to prevent the crises, but that central bankers failed to do what was necessary, and giving them more authority would only exacerbate the problem.
“Fundamentally, I think that they’re wrong in their analysis,” said Truman, a fellow at the Peterson Institute for International Economics. “It’s not that the central bank couldn’t control the expansion of credit. It’s that they didn’t control the expansion of credit.”
The debate over sovereign money, or other alternatives to the modern banking system, is an old one. Sigurjónsson cites the economist Irving Fisher advocated for something along these lines during the Great Depression, and the system would in some respects be similar to how banks worked before the 20th century.
One major advantage, as Martin Wolf has argued in The Financial Times, would be that this system would be enormously profitable for the government. He writes that if the United Kingdom operated according to this plan, the government could basically operate without taxation and without borrowing money, as long as it didn’t spend more than 4 percent or so of gross domestic product.
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 public 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.
“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 public 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.
In October of 2008, Iceland’s economy collapsed. In that same month Hörður Torfason, an Icelandic actor and activist, stood out front of the parliament buildings asking two simple questions: what has happened to our country, and what are we going to do about it?
From there built a popular movement that would grow to sizes as yet unheard of in the tiny Nordic country, forcing the resignation of the government, and of the leadership of the financial authority and the national bank.
A revolutionary folk hero at home, Torfason now spends much of his time touring the world, telling the bittersweet story of Iceland’s Nordic Spring, and sharing tactics and strategies with activists in other countries.
In this exclusive interview with rabble.ca, Torfason explains that despite all it accomplished, Iceland’s movement remains unfinished. The current government, elected on a wave of popular anger, has a mixed record, having stumbled badly on some key files. Torfason fears that the popular desire for change will sweep a reactionary, right-wing government to power.
We talked to Torfason before he spoke at a potlatch dinner hosted, appropriately enough, in a sprawling housing coop in Montreal’s East End. Two days earlier Torfason had spoken to a crowd of hundreds at the Montreal stop on his international speaking tour, organized by Concordia activist Benjamin Prunty. From Montreal he returned to Iceland, and will soon be leaving for New Zealand for a series of speaking engagements.
First of all, for the People of CANADA, who have heard some information regarding the events in Iceland, but might not have a strong grasp of the facts, could you just give us a quick summary of what has happened in Iceland over the last number of years?
Hörður Torfason: Well, in October 2008 we faced a financial collapse, which was a shock for the entire nation. We are a small country of 320,000 people in a nation that covers about 103,000 square kilometers. We have lived for decades being told by our government that we were one of the richest countries in the world, but something strange was going on, it didn’t really fit with reality. For people like me who travel the world and see a lot of things, there was something lacking. But people wanted to believe what was said and behaved accordingly. On October 6th 2008, the prime minister came on national television and told us something serious had happened. This was on a Monday and the banks were closed. We were not sure what was happening, but the government maintained that everything was under control. A lot of people lost a lot of money. Looking back at that time we all sort of knew that the money we invested with the national bank existed only in our dreams. The bank pretended to give you an interest rate on your money, but really it was all a fraud, so you didn’t lose the money you invested, you lost your dream, your imaginary earnings. This upset a lot of people. At first, people were at a loss and didn’t know what to do, me included. Since then, I’ve devoted my life to this struggle for our rights. On October 11th, I stood in front of the parliament with two questions; Can you tell me what has happened in our country? And, can you tell me what we can do about it? I’m a known artist in my country, so I used my webpage, I sent out emails for others to come. Not many people came. I stood there and I talked to the forty or fifty people that gathered. They were shy but they were angry. So what I did is I said, “let’s talk. My question is this, do you have any ideas about what is happening in this country?” I stood there day after day at 12 o’clock, because that was the lunchtime for politicians working inside the house [parliament]. After three days I realized that standing and asking questions wasn’t enough. So I got a car, sound equipment, drove around and announced that I was planning a big demonstration. I called friends of mine, artists and intellectuals, to try and clarify what was really going on. The problem is that media is owned by the rich in our country and controlled by politicians and political parties, so I started these outdoor meetings to share information.
It’s an old idea from the Greeks. That’s all I have been doing. I was trying to inform people about what was going on and start a conversation with the politicians. Little by little, these meetings grew into bigger demonstrations, where thousands and thousands of people marched. Every Saturday, there was an outdoor meeting with speakers, and a gathering of thousands of angry people trying to create a dialogue.
Little by little we agreed on our three major demands:
- for the government to step down;
- for the board of the national bank to step down; and
- for the board of the financial supervisory authority to step down.
I created a forum in these demonstrations for people to express themselves. It was non-violent, and at every meeting I read the three demands, asking thousands and thousands of people, “Is this what you want”? And they said “yes”. On the 20th of January 2009, I organized a rally to surround parliament, to make the politicians listen to us, because they always pretended we didn’t exist. I was expecting a few hundred people to join me, because it was at 1 o’clock in the middle of the day, but there were thousands of people, literally thousands upon thousands. I asked them to bring their drums, and pots and pans. They were angry, and people gathered there and protested continuously for four days. From early morning to late night there were bonfires, there were drums, and thousands of people. One of the things I was organizing was called the Orange Army, a civilian patrol meant to minimize the possibility of violence, and to protect police and all citizens. On about January 26, we had the biggest protest yet. The streets were filled with people everywhere, and the day after this happened the first minister resigned. On Monday, the government and the Financial Supervisory Authority both resigned. However we had the problem of the national bank. The leader of the bank was a former minister in Iceland, and put himself into the position of director of the national bank. He did not know how to run the bank. A month later he stepped down from his position.
We started learning how deep and widespread the corruption was, and we were in shock. From 2009-2011, this information came to light and we are learning more still today. In 2008 we were facing bankruptcy as a nation. Looking back, things turned out much better than we expected. Roughly speaking what happened was that at the end of 2010 and early 2011, the rest of world seemed to wake up to the financial crisis. We are talking about thousands of people who lost their homes, and are in debt for the rest of the lives. In Iceland, if you are in debt and you die, it passes on to your children. It’s a very bad situation, so we are still fighting for compensation. The world has the idea that we have solved all of our problems, which is why since 2011 I’ve been travelling the world [to tell our story]. In a way it’s my duty, because I think we can share experiences and learn from each other. Every country I visit, I learn about the situation there. From here I go back to Iceland, and then to New Zealand.
How do you feel about the current government in Iceland? You were able to accomplish your objective of getting rid of the last government, so have you seen an improvement since then?
HT: That’s a good question. The government we ousted was a right-wing party that preached neo-liberalism, gave away our natural resources, and left us in huge debt. The government in place now has done some amazing things, but also has made some mistakes. They gave back the national bank to idiots.
Were you hoping they would keep the banks nationalized?
HT: Well they did [nationalize the banks], but then they privatized them again. They went too fast and made a lot of mistakes, and we are paying the price for that. We are having an election again in the end of April, and we are worried that because people are angry and dissatisfied they will vote for the right-wing party again. So there is a lot of chaos and confusion and debates right now in Iceland. We’ll see what happens in two months’ time.
So what are some of those lessons that you think are important to take from what happened in Iceland, particularly in terms of taking down the government? Are there some lessons you would pass on to organizers elsewhere?
HT: Well I hope so because as I said, I’ve been to many countries and have been talking to a lot people. They are asking me questions about what I have done, but then they are not using my model. For example I was here lecturing for an hour. My speech was based on my life as an activist. I’m a professional actor; but I stepped out of the theatre in ‘72 because I didn’t feel like I had to borrow words from a playwright. I had my own voice. As an activist I’ve gone into exile, people have tried to kill me; it’s been a very rough life. I’ve worked in a way within the system I want to change, maintaining that if something is unjust in the world, you have to stand up and correct it. You cannot just sit on your sofa, or else nothing would ever change. I’ve learned many things in my lifetime about how to protest, and I’m ready to share it with other people if they’d like to use it.
How important to social change do you think it is to have strong social movements and people in the streets fighting for the type of changes they would like to see?
HT: Well no government wants people to stand up and protest. They want to hold onto power and maintain the status quo. I remind them continuously that the government is there to work for the people, and they should listen and respect the will of the people. But that’s exactly what is missing. Many politicians have been in power for 20-30 years, the same people working within the power structure. They lose their connection with ordinary people. So that’s what I’m reminding politicians of, not to forget the people as we are the voters, they need to keep that in mind for the next election.
What about the media situation in Iceland? A problem we had here in Quebec with the Maple Spring was that the media was fairly clearly opposed to the social movement. Have you had similar problems in Iceland?
HT: [Laughs] It’s exactly the same! Money and political parties control the media, and they don’t want people to protest. They work against us [to maintain their power]. I don’t trust the media. I remember the first time when I stood in front of parliament I was looking for young people who were good with computers, because that’s our media now, Facebook and so on. I found them on the third day and asked them to help me, and they said yes. That really was the catalyst that reached thousands of supporters through social media and emails.
So you did all this by going around mainstream media? Did the movement ever get a lot of coverage from the mainstream media?
HT: No, they tried to silence us. If they ever talked about me it was so negative, but you try not to listen to things like that.
Anything else you would like to add?
HT: The message is that you spread your word through non-traditional media formats; Out of this revolution we had all sorts of people fighting to get back their homes [which had been foreclosed upon]. We managed to elect people into parliament who are now fighting to make a change. Birgitta Jónsdóttir has been especially active as a member of parliament. She managed to pass a bill, based on an idea we call ‘immi’. The bill provides protection for whistleblowers and a place to publish the information they have found out.
Ethan Cox is a 29 year-old journalist, pundit and incorrigible rabble rouser from Montreal. A former union organizer and student union executive, Ethan has also worked on a number of successful municipal and federal election campaigns, and was a member of Quebec central office staff for the NDP in the 2011 election. More recently he served as Quebec Director and Senior Communications Advisor on Brian Topp’s NDP leadership campaign.
- 2009 Icelandic financial crisis protests, Wikipedia, page updated March 3, 2013 – Comprehensive coverage of the crisis from 2009-2011 including chronology, banking debt referenda, PM trial, photos, media excerpts, references and external links. Also features leadership of Torfason.
- “Iceland’s Peaceful Revolution” Interview With Hordur Torfason Published on Feb 2, 2013 — This is an audio-only interview with accompanying photos. Journalist Mark Taylor-Canfield Interviews Icelandic activist Hörður Torfason about the peaceful revolution in Iceland (2008 – 2012) which resulted in the resignation of the government, the prosecution and jailing of bankers, and a brand new constitution! This interview was conducted August 1, 2012 www.interoccupy.net. Torfason’s website: www.HordurTorfa.com
The tiny Nordic European island country of Iceland is presently experiencing one of the greatest economic comebacks of all time!
After the privatization of the banking sector completed in 2000, the economy was thrown into a tailspin when over a five-year period, private bankers borrowed 120 billion dollars (10 times the size of Iceland’s economy). A huge economic bubble was created, causing house prices to double, and making a small percentage of Iceland’s population rich enough to buy up overseas investments, mansions, yachts, and private jets, while leaving an absolutely unpayable debt for all Icelanders. Iceland was facing national bankruptcy.
In response to the failed banking system, in October 2008, Iceland’s revolution against this financial tyranny began, rather casually in the street, in front of the Icelandic general assembly.
In the duration of five months, the main bank of Iceland was nationalized, government officials were forced to resign, the old government was liquidated, and a new government was put in its place. By March 2010, Iceland’s people voted to deny payment of the 3,500 million Euro debt created by the bankers, and about 200 high-level executives and bankers responsible for the economic crisis in the country were either arrested or were facing criminal charges.
In February 2011, a new constitutional assembly settled in to rewrite the tiny nation’s constitution, which aimed to avoid entrapment by debt-based currency foreign loans. In 2012, Iceland’s economy is expected to outgrow the Euro and the average for the developed world, as estimated by the Paris-based Organization for Economic Cooperation and Development.
So how does a revolution like this take root and activate a citizenry to effectively respond to grand scale economic theft by bankers and politicians?
Hörður Torfason, a lifelong activist from Iceland, is credited with organizing the Icelandic ‘Kitchenware Revolution’, beginning with a simple vigil in front of parliament aimed at educating passersby and ridiculing the blatant crimes of the elite who worked there. When the foreign financial community (the IMF and the European Union) pressured Iceland’s Parliament to pass laws dictating repayment of debts privately incurred by bankers, the revolution was formally ignited and nearly turned violent when some Icelanders began throwing rocks at the capitol, attempting to pressure the government for redress.
Torfason and his supporters knew that a non-violent approach would be more effective, and formed a “human wall” of clearly marked orange-vested citizens between angry rock-throwers and the police line. Torfason believed that in order for a movement to be effective, one must use reason and information, as well as peaceful demonstrations, to send a strong message to politicians that the people refuse to pay the bankers’ debts.
The end result of the peaceful resistance to economic tyranny is a model for all Western nations who are currently being gutted by a totally corrupt banking system.
This story is much different than what has happened in the US since the banking crisis began in 2008. Large “bailouts” were granted to the bankers, and none of the responsible parties have faced criminal prosecution. And it appears that we are still at the mercy of the currency cartel and the dollar faces total destruction.
In Iceland, the prime minister was indicted, over 200 criminal charges were filed against the bankers, and all of the former CEOs of the 3 biggest banks were arrested. The new government supported citizens by passing a banking remittance that forgave debt exceeding 110% of home values. As a result, “banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population.” (source: Bloomberg.com)
Yes, the country continued to struggle economically after the 2008 revolution. But already today Iceland is thriving, with 2.9% growth in the economy in 2011, and 2.4% estimated by the OECD for 2012 and 2013.
The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here. It’s the broadest agreement that’s been undertaken. – Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik (source: Bloomberg.com) This is about our life and the future of the children, of the generations, of the young people. – Hörður Torfason (source: http://vimeo.com/25824717)
Can America hold out for a banking miracle like Iceland’s and somehow muster the fortitude to demand an end to economic corruption? Perhaps Hörður Torfason is available to help get America mobilized.
Inside Job, movie by Matt Damon
Alex Pietrowski is an artist and writer concerned with preserving good health and the basic freedom to enjoy a healthy lifestyle. He is a staff writer for WakingTimes.com, and an avid student of Yoga and life.