Charges against Icelandic banks for money counterfeiting

Written by Positive Money on May 27, 2015.

The Homes Association of Iceland, announced the filing of a charge to local police against all executives of all banks in Iceland:

The motivation for this charge is a recent report about the monetary system by member of parliament Frosti Sigurjónsson, commissioned by the Prime Minister’s Office. The report states very clearly that banks have in fact been creating new money when they issue loans in the form of new deposits which add to the supply of money already in circulation.

This kind of money creation is clearly in opposition to the sole right of the Central Bank of Iceland to issue bank notes and coins or any equivalent currency to be circulated as legal tender. Therefore it is inevitable to consider the electronic money creation of banks to effectively constitute money counterfeiting as defined by Article 150 of the General Penal Code No. 19/1940.

The Homes Association would also like to welcome the report about the monetary system by MP Frosti Sigurjónsson, as it clearly shows how fractional reserve banking has done great harm to the Icelandic homes and the national economy. The Homes Association encourages everyone to read the report and support its proposals of monetary reform. In order for the monetary system to serve the public interest it is vitally important to make substantive reforms.

Article 150 of the General Penal Code No. 19/1940 reads:

Anyone counterfeiting money for the purpose of putting it into circulation as legal tender and anyone acquiring counterfeit money for himself or others with the selfsame end in view shall be subject to imprisonment for up to 12 years.

In case counterfeiting be performed in such a manner as to reduce the specific value of legal tender the penalty shall consist of imprisonment for up to 4 years.

That second paragraph is really remarkable. Banks cause inflation when they over-lend. And inflation reduces the value of legal tender.