Iceland looks at ending boom and bust with radical money plan
I increasingly think small is beautiful. Recent projects in Northern Ireland and Scotland have made me muse on the challenges and benefits of being able to get everyone around the same table to think things through. Big countries can be awfully impersonal from a public policy perspective, particularly when you cant see the faces of those you affect. Strong local authorities, close to the people they serve, are part of the antedote to this problem, they need more powers to fill their potential. This stream of thinking was triggered by the fascinating story below:
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.