A Half-Right Monetary Reform for Iceland
A Half-Right Monetary Reform for Iceland The benefits of abolishing fractional reserve banking Image Credits: puyol5, Flickr . by Patrick Barron | Mises.org | April 28, 2015 The prime minister of Iceland recently commissioned a report by Frosti Sigurjonsson to recommend a better money and banking system for Iceland. The recently released report recaps Iceland’s sorry history of money and banking disasters and lays the majority of the blame for the 2008 collapse on the institution of fractional reserve banking, which caused an out-of-control increase in the money supply. Sigurjonsson recommends the abolition of fractional reserve banking, a separation of deposit and loan banking, and an end to deposit insurance. Unfortunately, Sigurjonsson also recommends more power for the central bank through what he calls the “sovereign money system.” An Out-of-Control Money Creation Process Sigurjonsson is correct that the central bank lost control of the money supply in the years leading up ...