Reform of the monetary system

The subject of reform of the monetary system has been raised and discussed from time to time over the years at WMNEG meetings. Just as the subject of basic income has come to the fore, there is growing interest in working for beneficial change in several countries. A summary of an article on another site follows.

The consulting group KPMG has published a new report commissioned the prime minister of Iceland. The report outlines the main benefits of a sovereign money system and relates on the various political developments that have been made possible by IMMR members. The launch in Reykjavik featured a supportive speech from the Financial Times’ chief economics commentator Martin Wolf and drew comments from the Governor of the Central Bank of Iceland

The report was commissioned by the Prime Minister’s office. It provides an overview of the sovereign money proposal, including a summary of the latest political developments and the academic debate. While the report is quite accessible to read, it does not provide any recommendations on whether sovereign money should be implemented or not. Download the full report here.

Már Guðmundsson, the Governor of the Central Bank of Iceland expressed concerns about sovereign money- see http://internationalmoneyreform.org/blog/2016/09/kpmg-iceland-report-sovereign-money/ to which economist Martin Wolf replied. Some points made:

• “There is a very very powerful set of reasons for believing that the status quo is intolerable” he concluded, before emphasizing the merits of sovereign money:
• Reclaim seigniorage (the proceeds of creating money) for the public benefit
• Create a more stable financial system
• Limit the ability of banks to ‘extract rent’ (i.e. extract wealth from the economy rather than generating it)
• Stop pushing up house price bubbles
• Have a much stronger impact on stimulating the economy than current measures like QE.

The Governor joked that whilst Iceland could not experiment with a sovereign money system due to its membership of the European Economic Area [although we think this point is incorrect], the UK has just voted to leave the EU and so should be the first to experiment! MP Frosti Sigurjonsso, who authored a first report to the Icelandic PM in 2014, disagreed with the Governor: “We [Iceland] are one of the most democratic nations. We can take initiative, we can change the system.” he claimed.