Hard to tell from the limited info in the article, but Iceland was the only country that didn't prop up their banksters with taxpayer funding after the bankster financial "crisis", so it wouldn't surprise me if the banksters were planning a way to regain control.

Yes, the private banksters definitely had a hand in creating the fear that tossed out the Articles of Confederation for the more statist Constitution. For banksters war means more unearned profits.

I believe that you are exactly right -- they're buying votes. -- j

I keep thinking that it's a Keynsian economist who
thinks that inflation is good and deflation is bad.
if I woke up tomorrow and my dollar would buy
*more,* rather than less, I would feel better!!! -- j

I can't imagine anyone thinking, "no, gov't should tacitly guarantee MMFs or bonds. That was a good policy." People for broad financial regulation should say why rather than just downvote.

" The insurance company will see to it that the bank complies with good banking standards. "
There were money market funds (like money market accounts but not FDIC insured) and Fannie bonds that were tacitly insured by the gov't. They could take risks b/c they knew the gov't kind-of sort-of guaranteed them. If gov't must be involved, it should at least be clear that anything else absolutely will not be guaranteed or bailed out, and it should stick to it.

Once the gov't offered to back money market funds, their rates instantly adjusted to be the same as money market accounts. That's been true now for six years.

there would be many insurance companies that would underwrite the business. No 1 insurance company could insure all the banks, Never, never allow the government to get its hands intermingled with private business.

Austrians want to outlaw FRB even if they disclose that they are FRBs.

I am not sure that is accurate. If they lie to their customers about their lack of reserves that is fraud.

First was the Constitution, which created the Government of Force and decreed that only government had control of money. There was, as always, much else that made no good sense:

http://no-ruler.net/3460/failures-of-the...

I've done some work in the insurance industry (though not in banking) and can give part of the answer to #2.

Yes, repeated catastrophes can happen, though it's statistically unlikely. If one year is especially bad for disaster losses, an insurance company (or its regulators) may feel the need to cut back on writing new business for a year or two, until it can again build up a reserve. If two or three years in a row are bad, the company or regulator may need to change their minds and increase the size of a reserve needed in the future. In the short term the company will raise rates to get its reserve back.

Overall, companies try to make sure that risk is spread. For example, one year, my then employer (a medium size national insurance company) discovered that they now insured 2/3 of the homes in one town of about 40,000 people in California's Sierras, in the middle of a forest. The problem with that is, if they ever have a major fire, the whole town is likely to go up at once. So the company placed a moratorium on writing new policies in that town until the number fell back to, say, 40% of the town or less. That way, if it happens, other companies will pick up part of the loss, and each one can handle it better.

I assume that the same principle would apply to hurricane country, especially for new insurers. No company would want to cover more of any one city-sized area than it can afford to rebuild. But each accepts a small share, and the job gets done.

For Iceland the main problem is their size. Their national population is 240,000 or so. That's really not a big enough risk pool to be able to spread risk. So when a disaster does happen, the government does what it can, and gets help from other countries and the Red Cross. It's not a function I'd want government to do if there's a good alternative, but for them there really isn't.

Thank Barney Frank... he was the one that led the charge because it was discriminatory to 'people in poor neighborhoods'. But, if you live in a particularly poor neighborhood, it usually means seasonal or part time or unreliable employment, poor credit history, low savings & reserves, etc... all things that contribute to not looking like a very good mortgage/credit application. There isn't anything on the credit application that asks what race you are - it has employment history, savings & investment accounts, and other credit obligations. If you have more than about 40% of your income going out to service debt, including your housing, you are just not a good credit risk. If you make minimum wage in a city with a high cost of living, the thought that you would be able to make a payment that is 400% of your annual income on a 30 year loan is absurd, but Barney didn't see much of a problem with that.

He couldn't force it down the throat of HUD (FHA) or the VA, as those are both cabinet level offices for the President, but he certainly made a dent in Fannie Mae & Freddie Mac by congressional action and then helped himself and his buddies to 'VIP Loans" from Countrywide & others. God forbid you criticize him though, he's gay, so you come off looking like a bigot if you go after him for his policies.

Probably a Clinton supporter taking offense.

Interesting thought. If a small country attempted a sound currency backed by gold, would a large country be able to "co-opt" the currency without permission? I guess a country could try to keep buying that currency, but it being backed by gold would mean endless amounts of it could not be printed. Wouldn't that drive the relative exchange price of said currency through the roof? Interesting question.

I laugh at the imagery of mouse on elephant. I also laugh at the imagery that maybe it would be the other way around, with large insolvent elephant cringing away from rock solid tiny little mouse.

Well, yes and no. Government public servants were arguably bribed by private bankers to give government authorization to private bankers.
The centralized power to create legal tender without assets to back it is a big problem and government is the ultimate source, but government agents may be manipulated by and for private interests.

Yes, but Austrians want to outlaw fraction reserve banks as fraud.

WTF are they thinking? Fractional reserve lending is a cornerstone of liquidity, confidence and economic growth. Countries like Iceland need to encourage a healthy velocity of money flow. The real value of money is its face value multiplied by the velocity of its flow. Money that sits in a bank is mostly worthless.

Not sure why this comment got a down vote???

As we have discussed in the Gulch before, the real issue is legal tender. Without the banks ability to create "legal tender" aka federal reserve notes, the banks notes should be treated the same as any other notes created by a corporation. FRNs would be as credit worthy as the banks themselves, and the free market/customers would decide their value assuming the customers could get valid data on the reserves/assets that the banks held.

Banks have proven through history that they will always eventually debase their notes. That is virtually guaranteed. Banking has no manufactured product to save them from their stupidity. Trusting a bank is as good as trusting a politician.

If banks were to be treated as any other corporate borrower and required to publicly provide valid proven data to back their FRNs then the banking industry would be a completely different one from the cartel it is has been for 102 years.

Seems to me, despite. DBHarding's disdain for Austrian economists, that the best approach would be no regulation controlling the reserves. Banks would make their own choices and would depositors and other customers.

What they're trying to do is create THEIR OWN federal reserve, rather than depend on those of either the dollar, Euro, or Danish krone. That's probably a good idea, considering what is likely to happen to the dollar, Euro, and krone in the next few years.

True, it would be more sound if it were real (gold-backed) money. On the other hand, a gold standard might mean that some much larger countries attempt to use the Icelandic currency as their own reserve, which would leave Iceland back in the situation they are in now -- a mouse trying to stay on the back of a galloping elephant.

There may not be a very good answer. I can't think of much of a better one than what they're trying to do, except maybe to ask the Danes to re-annex their country.

Since GOVERNments were 'given' total control of "money", and breached all rules of common sense by turning to unsecured Fiat currency, e.g. in America the Federal Reserve NOTE is nothing but paper and greenish ink, uh.... we have this problem!

Real money is always SECURED, by gold or silver or most any real asset. In a truly free market in which currency is produced by companies in competition with whatever currency they might issue, the consumer has a myriad of choices with very minimal risk, because they then have claim against those securing assets. Those barrels of oil or pounds of pork bellies or copper or anything else which has a market value can protect against one's "money" from vaporizing.

Once again, GOVERNment is the problem.

http://no-ruler.net has much to say -- take the time!

I like this proposal but for one thing -- it leaves the corporate veil in place, so stockholders can't be reached. (Or even board members in many cases -- because most banks in the US are incorporated in Delaware, where board members are immune from liability for corporate fraud.)

I would ban all corporations from the businesses of banking, brokering, and financial advising. Let those fields be inhabited only by limited partnerships, so that if the guy you entrust with your life savings screws up and loses them, he loses his own, too. It's only fair.

And don't tell me it's impossible. Adam Smith wrote about the Scottish banks of his time, which worked this way.

That system worked fine until the government told Fannie and Freddie to buy the sub prime loans. When my brother worked for Freddie Mac many years ago they only bought loans with low risk. That never should have changed.

Let's all just remain in a delusional state where our money is secure and our lives are safe, and those in power mean the best for us. Get a new house, get a new car, we live in paradise. A fool's paradise.