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Jan
08

The Tierra Currency: What, why and how

Post By gaia1 in Tierra Currency

 THE TIERRA CURRENCY: what, why and how.

The Tierra currency would be the single currency that nations and their peoples would be using for their financial interactions. It would not be a reserve currency such as the U.S. dollar or British pound because the strength of a nation’s currency is determined by its deficit or surplus position of Tierras. Moreover, historical currencies would not exist to be held by other nations. A global currency such as the Tierra is part of an international monetary system the architecture of which is based upon the monetary standard of specific tonnage of CO2e per person. The monetary architecture also include a global central bank and a balance of payments system that keeps track of both financial and ecological (climate) credits and debts.  

Reasons for pursuing the study and introduction of the Tierra currency are many. It would reduce the heavy fluctuations in currencies; it would eliminate currency manipulation and speculation; it would remove the currency of one nation and its fluctuations as a de facto global currency; it would contribute to humanity’s efforts in avoiding a looming climate catastrophe; it would transform the financial, economic and commercial systems given that the international monetary system acts like glue in binding those systems together; it would transform the unjust, unsustainable and, therefore, unstable international monetary system to one that is more just, sustainable and, therefore more stable.

The world’s unstable currency situation is well described in an article that was prompted by China’s inability to deal effectively with its transitioning economy and its fluctuating Yuan currency (thttp://www.nytimes.com/2016/01/09/business/dealbook/asia-china-renminbi-currency-devaluation.html). These currencies fluctuations—either through the invisible hand of export markets and/or poor domestic planning—are a demonstration of how our global monetary, financial, economic and commercial systems are not working, a major reason of which is they continue to enrich the few, impoverish the many and imperil people, species and planet.

One intermediate way of introducing the Tierra global currency and dealing with this unjust inequality in global systems is to replace the U.S. dollar by an expanded use of SDRs, already suggested by the Stiglitz 2009 UN conference and the Brueghel think tank. Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" has proposed a top-down (UN) and a bottom-up (grassroots) approach to pursue the Tierra carbon-based international monetary system with the Tierra global currency as one option and national currencies pegged to the carbon standard as another option. Its conceptual, institutional, ethical and strategic dimensions are updated at www.timun.net.

 

Mar
03

Bitcoin and future of local and global monetary arrangements

Post By gaia1 in Tierra Currency

This post compares Bitcoin and other local and global monetary arrangements with the Tierra system. We will see whether the NY Times isgoing to publish it. In any event, it will be used as a circular at the Nexus conference in Chapel Hill, both for a post session and also for my workshop on the TFD on Friday March 7. Details are listed at the events page.

BITCOIN AND FUTURE MONETARY ARRANGEMENTS

Op-Ed piece submitted to the NY Times  on 3/2/14

Bitcoin, Bitcoin variations, complimentary or local currencies, electronic information based currencies,  public state banks and other alternative payment and investment systems on the local and global level are evidence of the fact that the present privately owned banking systems and its associated international monetary system is not working effectively for many classes of people and institutions. This is a matter of great social, economic and environmental concern because the international monetary system, binding together as glue the monetary, financial, economic and commercial systems, can be considered to be foundation of a world order that enriches the few, impoverishes the many and imperils people, species and planet.

One of the beneficial effects of the emergence of Bitcoin and its recent major setback with the bankruptcy of Mt. Gox,  its major exchange, is the discussion of what money is, how it is created and controlled and, in the opinion of Robert Shiller of Yale University in his Times article of March 1,  how money should be measured as a unit of account. Such discussion can only lead to national and international monetary arrangements that will be more just, sustainable, and, therefore, more stable than the present ones.

As the inventor of the Tierra carbon-based international monetary system, a bold effort to show a pathway to resolving the looming climate catastrophe through monetary transformation, I have compared Bitcoin and similar virtual currencies in terms of their social, economic and ecological terms with other emerging monetary arrangements, be they virtual or not.

I consider the Bitcoin phenomenon to be at the bottom rung of new money arrangements, most of which are local or national efforts because the international monetary system with all its neo-classical shortcomings is still solidly entrenched. As recently argued by columnist Nocera, Bitcoin is basically a commodity rather than a currency in its meaning as a means of exchange or store of value. Because its supporters and investors want to escape financial institutions that are (slightly) regulated, Bitcoin has no regulatory structure to protect its investors. Thus, as a store of value, Bitcoin is on shaky grounds which is evidenced in the strong fluctuations on its exchanges. In terms of its economic and ecological impacts, Bitcoin is a lightweight currency. Being more of commodity rather than a currency it is a platform for speculation or, worse, as a conduit of drugs and other non-legal uses. Its economic and ecological benefit will be very little because of its miniscule investments in business operating on a triple bottom line.

On the other hand, local or complimentary currencies of which there are hundreds now since Robert Owen started the first one at the end of the 19th century contribute to the triple bottom line approach of local businesses. They make the provisioning of more goods and services possible, particularly in times of recessions. This is well described in the 2011 publication Creating Wealth, Growing Local Economies with Local Currencies written by sustainable communities planner Hallsmith and a well-known monetary system specialist Lietaer.

One step up from local currencies is the reemergence of state public banks where local governments place their tax receipts and other revenues in a state-owned bank. These banks are able to direct their investments to social, economic and environmental needs of the community without the need to borrow from the privately owned banking systems. The Bank of North Dakota has been successfully been investing since the 1930s, often working with the local privately owned banks. Presently, over a dozen legislatures in the USA are considering starting such state banks. Vermonters for a New Economy are in the forefront of this effort and obviously they are faced  with strong opposition of big banks, using heavy lobbying and spreading misinformation. Similar confrontations will become normal in other states in this transitional period to green economic and monetary systems.

On top of this pyramid of new monetary arrangements is located the global Tierra monetary system which would constitute an international monetary union. It is either floating exchange rates or monetary unification that Barry Eichengreen’s 1994 book proposes as possible future monetary arrangements. The Tierra monetary union (TIMU) as indicated on its website www.timun.net  is based on its carbon standard of CO2e per person. This monetary standard is not to be confused with the loyalty local carbon currency. The former is the standard on which national currencies or the new  single global currency of the Tierra are pegged, while the latter, together with other environmentally-based local currencies, is not a standard but a loyalty program where customers can pay 10-20% of their bills with these carbon currency units (CCU). The Tierra is also not to be confused with a voluntary carbon standard, which individuals or businesses use as part of their pursuit to living lightly on the planet. The Tierra monetary standard leads to fixed exchange rates that fluctuate within a small band. It also leads to balance of payments system that keeps track not only of financial but also ecological (climate) debts and credits. The Standard also leads to the need for a global central bank, which would be governed by the representatives of the regional monetary unions such as exist in Europe, USA, West and East Africa, Asia. My 2012 book The Tierra Solution: Resolving the climate crisis through monetary transformation presents in detail the conceptual, institutional, ethical and strategic dimensions of this bold monetary plan for the future.

Future monetary arrangements on the local, state, regional and global levels will be very much determined by an informed and politically savvy citizenry. They will ask the hard questions about progress, wealth, money and demand an explicit normative framework of principles that would guide the search for answers. The development of principles is particularly important in 2014 when humanity is preparing for the post-2015 development agenda in which principles, unfortunately, do not yet precede methods or, in UN parlance, GTIs(Goals, Targets, Indicators).

“As to methods there may be a million and then some, but principles are few. The man who grasps  principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”

Ralph Waldo Emerson, 19th century American philosopher.

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Frans C Verhagen, M.Div., M.I.A., Ph.D. is a sustainability sociologist with training and experience in divinity and international affairs, particularly green monetary economics. He founded the International Institute for Monetary Transformation in 2009 which is engaged in research, education and advocacy in alternative global monetary systems.

 

 

Feb
11

Soiund money for the 21st century

Post By gaia1 in Tierra Currency

SOUND MONEY FOR THE 21ST CENTURY

Frans C. Verhagen

Submitted to the New York Times  OPED editors

Saturday, February 04, 2012

Sound or hard money has been mentioned many times in the present Republican campaign, particularly by Ron Paul and less so by candidate Gingrich. The latter wants to establish a Gold Commission, following the example of Reagan in the 1980s. Charles Kadlec, a contributing blogger for Forbes Magazine, wrote an overview article on the gold standard on 1/23/2012, well before the Florida primary, in which he supported Gingrich’s position. He argued that Gingrich  has a leg over Romney and Santorum because  a gold standard policy  “enjoys a clear plurality of support among Republicans, Democrats, blacks, whites, hispanics and individuals across all income categories.” He pointed to evidence of this plurality by referring to a poll in October 2011. “When the Rasmussen polling firm last October asked 1000 likely voters if they were “favorable or unfavorable about returning to the gold standard,” 44% were favorable versus 28% unfavorable.  However, when the respondents were asked: Would you “favor or oppose returning to a Gold Standard if you knew it would reduce the power of bankers and political leaders to steer the economy?” those in favor increased to 57% versus only 19% opposed. Floyd Norris in his “High& Low Finance” column of February 3 believes that history is repeating itself in these presidential debates where candidates propose gold commissions but do not follow up on their recommendations. He points to a survey by the University of Chicago in January of 40 economists who, with very few exceptions, have dim views of the feasibility of a gold standard. Should this survey not have included a question about a non-debt financial system as proposed by many outstanding economists such as Yale’s Irving Fisher in the 1930 as their response to the Great Depression?

While this superficial monetary debate is taking place in the Republican presidential campaigns in the US, globally the international monetary system is characterized by a wild west that is alternatively known as monetary statecraft, about which Cornell University economist Jonathan Kirshner has written.  Both the US and China are engaged in global monetary policies that are short-sighted and prevent financial and economic renewal and transformation.

The U.S. government still clings to the U.S. dollar as the world’s major reserve and transaction currency heaping up deficits in the process and forcing other countries to hold its currency in an expensive global reserve system of some $100 billion annually for non-reserve countries, particularly in the developing world. Notwithstanding  the recommendation  of the 2009 UN Stiglitz Commission to transition to a Special Drawing Rights or similar regime, it continues to keep the international monetary system out of balance on account of balance of payments debts.

At the same time, this global reserve system and many other factors, such as a high savings rate and renminbi manipulation, makes China, with its $3.18 trillion foreign exchange holdings, the other major power in keeping the international monetary system out of balance. New York Times journalists Bradsher and Alderman’s  February 3 article entitled “China Talks of Helping European Debt Rescue”  makes clear that China wants to take very little risk in that rescue and demands trade and other preferences, preventing a global economy from  growing. China still seems to be refusing  to change its euro holdings of strong European countries such as Germany and The Netherlands into investing in euro bonds of weaker European countries. This state of Wild West monetary affairs shows how, at least in monetary terms, China is gaining an  upper hand over the US.   Such a system is unjust, unstable, and unsustainable. It is unjust because it mostly operates for the benefit of hard currency countries while the rest of the world and the global economy itself suffer. Because the international monetary system is unjust, it is unsustainable,  and, therefore unstable.

After having the renminbi become more convertible and part of the SDR basket of hard currencies, it would be in China’s interest to overhaul the international monetary system by transitioning from the SDR, not to a gold standard, but to a  carbon standard that is based on a specific tonnage of CO2e per person. Such a system would combat the heating of the planet and decarbonize societies in both the global North and South  If such a system were instituted, no global reserve system would be  needed anymore.  An updated Bretton Woods system along with a Keynes’ International Clearing Union could be developed and a Global Central Bank created.  A carbon-based international monetary system could function as the basis of a global governance system, because it integrates the social, economic and environmental challenges of sustainable development, one of the main challenges of the Rio June 2012 Earth Summit.  Maurice Strong of Earth Summit fame considers such a system “innovative.” It is also noteworthy that the 2000 delegates at the DPI/NGO Conference in Bonn in early September of last year advised governments in their  Declaration to “Rethink the international monetary system to be based on a carbon standard.”

Making monetary justice the guiding principle of global governance, and as such, the basis for the G20 and Earth Summit negotiations would consist of three major challenges dealing with needed transformational changes in the privately-owned banking systems, in the debt-based financial system and in the dysfunctional international monetary system, called criminal by Nobel Prize economist Robert Mundell. First, banks are to become utilities without the privilege of creating money. Second, the financial system is to be based on money or credit which only the government can create and circulate into the economy. The Chicago Plan of the 1930s, proposed by many outstanding economists to deal with the Great Depression, is an example of such a system. The most challenging transformational change of all—the international monetary system-- is to be based upon a carbon standard and governed by a Global Central Bank with its proper administering, monitoring, regulating and money creating functions. This novel concept is presented by the International Institute for Monetary Transformation (www.timun.net) in its forthcoming book entitled THE TIERRA SOLUTION: Monetary Transformation, Climate Change and Sustainable Development. (Cosimo Books, April 2012). Adopting such a carbon-based international monetary system would constitute a global monetary governance system that could be the basis of a comprehensive global governance framework beyond Rio 2012. Those in agreement with this monetary approach could sign on to the international petition on http://www.change.org/petitions/g20-and-rio-summitteers-make-monetary-justice-the-basis-of-your-negotiations.   

The above tri-partite system is a possible answer to the question what sound money means in the 21st century. It is in agreement with the monetary principles adopted by the Lincoln Administration in 1865: “Money is the creature of law, and the creation of the original issue of money should be maintained as the exclusive monopoly of national government. Money possesses no value to the state other than that given to it by circulation…… No duty is more imperative for the government than the duty it owes the people to furnish them with a sound and uniform currency, and of regulating the circulation of the medium of exchange so that labour will be protected from a vicious currency and commerce will be facilitated by cheap and safe exchanges.”

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Frans C. Verhagen, M.Div., M.I.A., Ph.D., a sustainability sociologist, is the founding president of the International Institute for Monetary Transformation and author of the forthcoming book The Tierra Solution: Monetary Transformation, Climate Change and Sustainable Development

 

 

Apr
20

Forgo dollar dominance and seignorage

Post By gaia1 in Tierra Currency

FORGO DOLLAR DOMINANCE AND SEIGNORAGE

On Saturday April 16, 2011 Brazilian Finance Minister Guido Mantega told the IMF policy committee that the wealthy nations were attempting “to export their way out of difficult economic situations”  by printing  money and keeping their interest rates low. The effect of these policies is driving up prices of food and oil causing hardships, particularly for the developing world. These policies also lead to the strengthening of their currencies, so that their exports are at a disadvantage and bring in less revenue. On top of these effects developing countries are forced to defend against hot financial flows and currency speculators by adding to their reserves billions of dollars bought at very low interest rates. In the face of this situation US Treasury Secretary Geithner insists that emerging economies should have the value of their economies be determined by those market forces.

The main reason for this unjust international monetary system, which is called criminal by Nobel Prize winning economist Robert Mundell, is the fact that this non-system is based upon a national currency functioning as an international reserve and transaction currency. Several proposals have been made, particularly by China and the UN Stiglitz Commission in 2009, and particularly the Sanya meeting of the BRICS countries in April 2011 to have the IMF’s synthetic currency of Special Drawing Rights (SDRs) given wider use, so that dollar dominance is removed and the international community moves towards a more equitable, sustainable, and, therefore, stable international monetary system.

There is also a strong domestic reason for the U.S. government to forgo dollar dominance. A large part of the federal debt is due to the ease for the U.S. government to get low-cost financing by its sale of US Securities. Like Britain in the 19th century the USA in the 21st century is able to garner the dubious benefits of this seignorage of the dollar. No lasting debt solution can be found for the USA without considering the impact of seignorage of the U.S. dollar. Examiner’s financial writer Kenneth Shortgin Jr. wrote on April 17 that the above BRICS meeting had as its aim the “elimination of the dollar and the creation of new currency” based upon gold. “This is why oil nations, along with the relatively strong BRIC countries, are putting their backing to a gold based currency which will help curb much of the inflation that the dollar is forcing onto the world.”

What is needed on a temporary basis is a gradual and planned transition of U.S. dollar reserves into substitution accounts of SDRs. The worst thing that can happen to the US, China and other reserve currency holders is an unplanned and sudden collapse of the dollar. So, in forgoing dollar dominance the U.S. government would be able to produce an equitable, sustainable, and, therefore, stable debt reduction program, would avoid a possible and even worse financial crisis than the one of 2007-8 and, probably most importantly, would assume monetary leadership in shaping an equitable, sustainable, and, therefore, stable international monetary system.

While the SDR substitution route is the route to follow for the short term, the long-term route does not only include forgoing dollar dominance and but seignorage all together. Euro dominance or yuan dominance are to be forgone in the same way as the U.S. government and the international monetary community have the forgo dollar dominance at this time.

Having forgone the fallacy of monetary dominance of one nation’s currency and even a basket of several nations’ currencies within or without SDRs the next step for the U.S. government and the international monetary community is to engage in collective monetary sovereignty. Monetary rules of the game have to be established so that a monetary level playing field can lead to an equitable, sustainable, and, therefore, stable international monetary system. In such transformed system a monetary standard has to be found on which all currencies or a world currency can be pegged The most prosperous period during the last hundred years was the one of the 1950s and 1960s when the international monetary system was based upon the dollar/gold standard, when rising wealth was distributed equitably and the emerging international corporations were still regulated.

The standard for this transformed international monetary system with its collective monetary sovereignty is to be a standard that would contribute not only to monetary stability, but also to the reduction of this century’s most pressing and cross-sectoral problem of climate change. Thus, a carbon-based monetary standard is suggested to become the center-piece of a new monetary paradigm. Its unit of account would be the Tierra, Spanish for Earth. The standard would consist of a specific amount of tonnage of CO2e per person determined in negotiations following the findings of climate science as presented in the IPCC reports. The proximity of a nation’s economy to the standard would determine the value of its currency or its amount in Tierras in the case of the Tierra world currency. In the latter case the Tierra is would not only be a unit of account, but also a medium of exchange and a bankable store of value. Thus, the higher the decarbonization level in a nation’s economy, i.e. the more sustainable its energy system and its citizens’ life styles, the stronger its currency. Such carbon-based international monetary system would combat the climate crisis and advance low carbon and climate-resilient development, the real challenge of any model of sustainable development.

The integration of the challenges of climate change and sustainable development in this transformed international monetary system provides a model of a 21st century global governance system. This idea of basing the international monetary system on carbon has received favorable comments from Maurice Strong, the Secretary-General of both the Stockholm and Rio UN Conferences on the Environment. Using a carbon-based international monetary system as the basis for a global governance system was presented at the second Yale/UNITAR conference on Global Environmental Governance (September 17-9, 2010) and  is considered a “thinkpiece” for the Rio 2012 Earth Summit by the Stakeholder Forum in  http://www.earthsummit2012.org/index.php/institutional-framework-for-sd/sdg2012/sdg-thinkpieces.

Transforming the international monetary system which acts as glue, lubricant,  and as linchpin of the monetary, financial, economic and commercial systems means transforming those systems. Thus, this monetary transformation, which is fundamentally different from the reformist monetary proposals dealing with the global reserve system, is able to transform our present world (dis)order which enriches the few, impoverishes the many and imperils species and planet.

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Frans C. Verhagen, M.Div., M.I.A., Ph.D. is a sustainability sociologist with the International Institute for Monetary Transformation. His forthcoming book is entitled THE TFD GLOBAL GOVERNANCE SYSTEM: Using a transformed international monetary system to combat climate change and advance low carbon and climate resilient development

 

 

 

 

Jan
13

The Tierra Fee and Dividend System and Carbon Trading

Post By gaia1 in Tierra Currency

 

The January 9 blog post has been significantly improved after attending a panel discussion on Sunday January 10 and, especially  the reading and studying of Hansen letter of the chairman of the Carbon Trading Summit that is being held today.

 

Though I have abandoned the cap-and-trade approach for some time, had some positive opinion about cap-and-dividend and carbon tax approaches, have been in favor of the "Whole World" view approach of Cap & Share, I now go one step further. I have reanalyzed the Tierra Cap & Share approach with its monetary dimension and have decided to base the Tierra system on a variant of the Hansen fee & dividend. The two major differences, as can be seen below, are its inclusion of the concept of climate justice and its global orientation. So the TCS system is going to be labeled the Tierra Fee & Dividend or TFD system. Thus, the following 12 statements are reflective of this decision.

 

The reformulated position of the International Institute of Monetary Transformation’s tripartite TFD system in respect to the climate crisis and humanity’s pursuit of a sustainable energy future is the following.

 

1.      The climate crisis being the challenge of the 21st century on account of its present and future disastrous consequences for people, species and planet presents an unparalleled opportunity to transform present international systems that enrich the few, impoverish the many and imperil the planet. A paradigm shift is to take place in thinking and institutional renewal to profit from this unparalleled opportunity.

2.      Climate change being an ecological change has to be reversed ecologically, i.e. this ecological reversal is to take place through the efficient use of renewable energy technologies, the de-carbonization of industry and REDD. New strategies are needed to re-inhabit the Earth to fully make that ecological reversal and the pursuit of a sustainable energy future possible. Societies have to be re-powered quickly, formidably and fairly, so that low-carbon living becomes the norm.

3.      Ecological indebtedness of industrialized countries in the North is to be recognized as a historical fact with great ethical import. It was both market and centralized economies in the past that externalized air pollution leading to climate crisis and thus both economic systems are guilty of past and present  “atmospheric occupation”.

4.      Agreement on capping emissions is politically not possible globally; scientifically determined caps can be used nations to determine the price of a ton of carbon and legislate a schedule of carbon fees accordingly. The Copenhagen Accord of COP 15  “took note” of the need for MRV (monitoring, reporting, verifying) of carbon emissions;  COP 16 in Mexico City is to agree on a range of carbon densities and target dates; on the social and ecological costs of a ton of carbon; and consider the establishment of UN Commission on Monetary Transformation to investigate, among others, the feasibility of a carbon-based international reserve currency; decide to accept the offer of Brazil to host the 2012 Earth Summit.

5.      There is value for the proposed UNEP Technical Review panel to evaluate alternative "Whole World" view approaches which would also include the global fee & dividend approach proposed in the TFD system.

6.      The cap-and-trade carbon reduction methodology and to a lesser extent other capping approaches is fatally flawed, because

a.                   It is fast, formidable and fair. Cf. Dr. Michael Dorsey of Dartmouth College

b.                  It believes that carbon trading plus off-sets can cope with the global climate crisis

c.                   Cap-and-trade does not address itself to all sources of GHG emissions and is not  formidable enough, for it addresses itself to those that can measured and commodified. Apart from the dubious ethical issue of commodifying a global commons such as the atmosphere, and the opportunity for gaming in this unregulated carbon market,  it does not address itself to the emissions from land use, destruction of forests, etc. In other words, its scope and scale is too limited.

d.                  The results of the cap-and-trade system in terms of actual reduction of emissions are poor, its greatest drawback.

7.      The carbon tax carbon reduction methodology is a little more acceptable, because, unlike the cap-and-trade which focuses on the price of carbon in a volatile carbon market, carbon taxes are set by legislators who use the fiscal system to tax different carbon users, either upstream or downstream.

8.      The cap-and-dividend carbon reduction methodology has advantages over the methodologies in statement 6 and 7, because it does not permit offsets and returns the income of the auctions of the carbon emissions permits in a fair way to energy consuming families who have to pay higher energy prices.

9.      The Cap & Share approach is based upon an equal sharing of carbon emissions permits to all adults in a country or region or in the world. The latter, the global Cap & Share, would create ecological debtors in the North and ecological creditors in the South. Various ways are devised to trade those permits that are not needed by an individual with a low carbon footprint

10.  There Fee & Dividend approach to reducing carbon emissions and in the process push the private sector to develop alternative energy technologies does include carbon emissions permits that are issued or auctioned under a carbon cap. It is fee based to upstream users of fossil fuels by having a schedule of prices per ton of CO2 legislated the revenue of which are returned to legal residents. The Fee & Dividend approach does not include a global dimension with its demand for climate justice

11.  The  Tierra Fee & Dividend system adds an international monetary dimension to the  Fee & Dividend system that includes the historical fact of ecological indebtedness of countries in the North.

12.  The Tierra Fee & Dividend System also includes the monetary dimension of carbon-based international reserve currency of the Tierra, which is part of a UN based International Clearing Union as proposed by John Maynard Keynes in 1944 .These  Tierras are monetized carbon emissions permits, that like in a monopoly game, are equally distributed to residents 15 years and older. This “quantative easing” by Tierras becomes part of a nation’s carbon account in its balance of payments, thus constituting an institutionalized funding mechanism for mitigation and adaptation measures and development. In order for the tripartite TFD system to work the public sector has to reclaim the privilege of fractional reserve banking from the privately-owned banking systems, so that the regulation of international financial transactions via the Tierra International Clearing Union becomes possible and transparent. Banks become utilities which would also not engage in securities dealing.

 

 

Jan
07

Four main arguments and six challenges of the Tierra Cap&Share system

Post By gaia1 in Tierra Currency

There are three main parts to the TCS system which are like the three legs of a stool. They support this tripartite monetary proposal to deal with the climate crisis. Though they are inextricably connected, each of these three components can be considered to constitute a subsidiary argument to the TCS system as a whole. The fourth argument consists of the feasibility of having these three components combined into one system, i.e. the TCS system.

 

I will indicate in each argument the level of acceptance as I presently believe to be the case.

 

1. Monetary argument for a carbon-based international reserve currency

  • Need to move away from present reserve currency—increasingly acceptable given the June 2009 UN Stiglitz Commission’s report
  • Need to be base the new international reserve currency on a carbon standard rather than basket of currencies, purchasing power parity, etc—not yet cogently presented publicly. The TCS system book would be a primer.

2. Cap & Share carbon reduction approach argument

  • Advantages over cap-and-trade, cap-and-dividend and other carbon reduction methodology – uphill battle since early 1990s
  • Advantages over other "Whole World" view approaches—will become evident after the UNEP Technical Review of these approaches.

3. Public control of money creation and regulation of financial flows

  • Regulation of financial flows accepted, though reform legislation weak. Flows to be part of a Tierra International Clearing Union system
  • Substantial movement in the US and UK to remove the fractional reserve banking from the privately-owned banking systems.

4. Feasibility of having all three arguments for the tripartite TCS system

  • TCS system is not publicly presented yet, so public acceptance is not known
  • Widely accepted is the notion that innovation is often a new way of using existing ideas—so acceptance of parts or the totality of the foregoing three arguments is the beginning of the acceptance of the TCS system.

 

Four of the six main challenges are the four arguments presented above. Though parts in the four arguments are acceptable to a certain degree, while other parts are still unacceptable, all four arguments still present a challenge, particularly also their combination in argument 4.

The other two challenges of the TCS system can be considered foundational challenges. They constitute the foundation upon which the TCS system is built. One deals with a sustainability economics framework that stands in opposition to the neo-liberalist market framework that is failing both people and planet. The other deals with a value framework that integrates social and ecological values as proposed in the 2000 benchmark version of the Earth Charter.  It was at the beginning of the June 2009 UN Conference that GA president Father Miguel D'Escoto Brockmann MM eloquently introduced the Earth Charter as a value document for further planning on the financial and monetary crisis and its impact on development. http://www.un.org/ga/president/63/statements/econferenceopen240609.shtml  He advised the participants to go beyond “controls and corrections” of the present system and seek transformational change based on its vision and its ensuing global ethics.

It will have become obvious that the proposed TCS system, however valid and useful, is far from being adopted in the next couple of years. It constitutes a monetary transformation not simply a monetary reform. People are accustomed to adopting reforms, far less so transformations, let alone in a field that is arcane to most.

 

What may happen is the growing acceptance of the two foundational challenges and parts of the four challenges that are associated with the components of the tripartite TCS system and their integration. It is up to enlightened states and effective CSOs to help advance the larger vision of a fair, sustainable, and therefore, stable international monetary system that would be used to reduce the ecological indebtedness of countries in the global North for the benefit of people and planet in both the global North and South.

 

Dec
22

From impossible to possible

Post By gaia1 in Tierra Currency

Unpacking the contents and process of the Copenhagen Climate Conference during the 12 days in mid-December 2009 is not a question of days, but of months and even longer. However, one thing that stands out now, at least for me, is the fact that it is an important part of a century-long fight that humankind is going to be engaged in in restoring the Earth’s climate, the source of all life, human and otherwise.

It is within this time frame that I have been presenting in this blog and its website a transformational proposal that would have dramatic and beneficial impacts on both the economic and climate crises which, in greater or lesser severity, will be with us for many decades to come. It is a proposal of such radical (transformational) changes in international monetary, financial, economic and commercial systems that it will be characterized as impossible, fantastic, unworkable. Indeed, it may seem like that in the short term, but seen in the larger arc of international global governance, the proposal would infuse into the maelstrom of ideas an idea whose time has to come in the near or medium future.

In pursuing this very ambitious idea of restructuring the world’s monetary system and placing it in the service of funding of climate mitigation and adaptation measures I am inspired and motivated by the sentiment that early 20th century German sociologist Max Weber elaborated in  Politics as a Vocation. He considers politics to be astrong and slow boring of hard boards”, which takes both passion and perspective. “Certainly all historical experience confirms the truth—that man would not have attained the possible unless time and again he had reached out for the impossible.” Steadfastness of heart is needed, otherwise “men will not be able to attain even that which is possible today. Only he has the calling for politics who is sure that he shall not crumble when the world from his point of view is too stupid or too base for what he wants to offer. Only he who in the face of all this can say ‘In spite of all!’ has the calling for politics.”

Within this noble notion of politics that many professional politicians seem to have forgotten, I consider the TIERRA CAP&SHARE framework a manifestation of that noble notion of politics as it infuses into the political process an ambitious policy proposal that advocates a radical departure from present narrow national objectives to a firm international governance structure and process, starting in the monetary field.

 

Nov
18

Kyoto2 and the Tierra Monetary Paradigm

Post By gaia1 in Tierra Currency

KYOTO2 AND THE Tierra Monetary Paradigm

18 November 2009

 

The main argument of Oliver Tickell’s 2008 book Kyoto2-how to manage the global greenhouse is that the Kyoto protocol, the first tentative step towards avoiding the threat of global heating, has failed and that a new course of action is needed. Like other "Whole World" view approaches to the climate crisis, Kyoto2 advocates an equal per capita sharing of the environmental space, including the atmospheric space. His website www.kyoto2.org  intends Kyoto2 to be “a framework for a new climate agreement under the Climate Convention intended to replace the Kyoto Protocol beyond 2012. It aims to be effective by delivering the UNFCCC’s objective of stabilizing the GHG concentrations at “a level that would prevent dangerous anthropogenic interference with the climate system ... within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner."  It wants to be efficient by  using auctions, open markets, targeted expenditures and appropriate regulation, while minimizing accounting and compliance overheads, to provide 'the gain without the pain'. It wants to be equitable by addressing the needs of poor people and poor countries, and by mitigating the impacts of climate change for the benefit of both present and future generations.

 

The Tierra Monetary Paradigm agrees with Kyoto2’s detailed analysis of the failure of the present Kyoto protocol’s approach. It has hardly produced any significant carbon reductions because its flexibility mechanisms do not work. The cap-and-trade system in Europe and the one that is being proposed in the USA are more favorable to energy companies and their carbon markets than to a decrease in atmospheric pollution. The Tierra Monetary Paradigm also agrees with Kyoto2 that radical course of action is needed. Here the two approaches diverge.

 

The main difference is the point of departure. While Kyoto2 addresses itself solely to the climate crisis, the Tierra Monetary Paradigm addresses itself to both the climate crisis and the economic crisis or to the longer term associated challenges of financial and ecological indebtedness among nations. It stipulates that both crises have to be approached simultaneously. If Kyoto2 were to be accepted and implemented and the world would still be afflicted with high unemployment or with another economic crisis on account of the lack of fundamental reforms, the overall outcome would be ineffective. By tackling both the economic and climate crises simultaneously, the Tierra Monetary Paradigm provides a pathway of solving the shorter economic crisis through solving the climate crisis. This is done not only through the monetary transformation of basing the new international reserve currency on a carbon standard, but also by investing in renewable energy technologies.

 

 

Nov
12

Overview of stepts of the Tierra Monetary Paradigm

Post By gaia1 in Tierra Currency

The Tierra is a carbon-based international reserve currency that can be pursued as a stand-alone monetary reform, or as part of monetary paradigm that is designed to be a pathway to resolving the economic and climate crises and the financial and ecological indebtedness of nations. In this integrated form the Tierra Monetary Paradigm is a carbon reduction methodology based upon a transformed international monetary system. The Paradigm is built upon the adoption of the supranational, carbon-based international reserve currency of the Tierra which would replace the national or regional reserve currencies of the dollar, euro or yen. Its two main pillars are the Cap & Share approach to reducing GHG emissions and the public control of a nation’s money creation system.

Cap & Share is one of the "Whole World" views that include others such as Cap and Dividend, Contraction and Convergence, Greenhouse Development Rights, Kyoto2 and Reduce and Invest. The steps in Cap & Share presented in the following diagram are from www.capandshare.org .

 

These five steps are also part of the application of the cap-and-share approach in the Tierra carbon reduction methodology, where additional steps are needed given its fundamental connection with a transformed international monetary system. Thus, the front-end of the Tierra Monetary Paradigm that underlies the Tierra carbon reduction methodology consists of steps to establish the monetary architecture for the Tierra

1. Pre-capping and sharing monetary preparation
a. Replacement of existing reserve currencies and a possibly transitional SDR by the supranational, carbon-based Tierra
b. Development of a carbon standard to monetize the Tierra and determination of its price and procedures to adjusting it
c. Establishment of fixed exchange rates based on carbon standard
d. Establishment of balance of payments mechanism for settling both the financial and ecological accounts
e. Establishment of UN Monetary Board
f. Establishment of national Tierra Administrative Boards
g. Public control of central banks and their banking systems
2. Capping of the GHG emissions
a. Use of the best scientific data of the IPCC and other sources
b. Emphasis on the ethical import of setting targets
c. Political agreement by the CoP of the UNFCCC
3. Sharing of the carbon emissions permits (CEMPs)
a. Agreement on the equal allocation of CEMPs
b. Development of CEMPs into Tierras, i.e. monetization
c. Transmission of Tierras to a nation’s Tierra Administrative Board that functions as an independent trust
d. Determination of impacts on money supply
4. Selling and buying of monetized Tierras
a. Among nation states in settling financial and ecological indebtedness
b. Among citizens when the Tierra becomes a vehicle currency to be decided by a nation’s Tierra Administrative Board
5. Incorporating the allocated shares in the carbon account of a nation’s balance of payments.
a. Development of the surplus or debit carbon account
b. Balancing both the financial and carbon accounts
6. Overseeing the Tierra balance of payments by the UN Monetary Board
a. Use of IMF/WB resources, particularly informational ones
b. Working closely with UNCTAD and gradually phasing out the WTO and its agreements
7. Enforcing the integrity of the Tierra carbon reduction methodology with its monetary architecture, particularly its balancing mechanism under the ever tightening carbon cap.

While Cap & Share can be started in one country, the Tierra Monetary Paradigm needs an ecologically debtor country in the North and ecologically creditor country in the South to get started. In that way carbon debts and credits can be balanced and a transfer of Tierras can flow from North to South where they can pay for the settling of legitimate financial debts and for imports that are needed for development and climate mitigation and adaptation measures.

 

 

Nov
12

The declining dollar and the Tierra

Post By gaia1 in Tierra Currency

 In today’s New York Times Javier C. Hernandez headlines his”Stocks and Bonds” section with “Dollar’s Drop Lifts Shares, Gold and Oil.”  While the dollar has lost some 50% against the euro, trading at $1.4976 Secretary Geithner does not seem happy, at least publicly. Throughout the past week, at meetings of the Group of 20  in Scotland last weekend and in Tokyo earlier this week and today in Singapore’s APEC meeting, Mr. Geithner believes “very deeply that it’s very important” for the US economy to have strong or robust dollar. He also “acknowledged, according to Reuters, that the United States carried a special burden for protecting the currency’s value because it is the global reserve currency.”

 

            I would like to see that the Obama Administration were to apply his “New Foundation” philosophy to the dollar, particularly in its role of the major international reserve currency unit. It seems by leaving the dollar to fluctuate the impression is given that the Administration is happy to see this slow and steady decline of the dollar: it promotes exports and reduces the debt to domestic and foreign lenders.

 

            China, other BRIC countries and particularly the June UN Stiglitz Commission’s report are advocating a non-national international reserve currency unit. While a new reserve unit could be based upon a large basket of currencies or even special SDRs, basing a new unit on a carbon standard such as the Tierra had many advantages. The monetary, economic, commercial and ethical case for the Tierra was made in the October 10 blog.

 

            Now I want to point out that it would be possible to introduce the Tierra, not as part of a paradigm shift in monetary relations, but as a stand-alone currency unit, i.e. without its two pillars of the Cap & Share approach and the public control of the money creation system. This would expedite its acceptance, but not its effectiveness. It is the Tierra Monetary Paradigm as a whole together with its two pillars that makes for a transformational change in both the monetary, financial, economic and commercial systems. It presents a pathway, not a blueprint to resolving the economic and climate crises and the financial and ecological indebtedness among nations.

 

Oct
10

The Case for the Tierra

Post By gaia1 in Tierra Currency

THE CASE FOR THE TIERRA

10 October 2009

 

The US dollar is under pressure. The Guardian 6 October report that various nations in the East are discussing to denominate oil prices away from the dollar may not be fully accurate, but as John Browne of Euro Financial Capital pointed out it is only a question of when not of if the dollar is dethroned from its privileged position.

 

Unlike Ron Paul who is in his End the Fed have very particularly ideas on the way forward, Britisher Browne is basically silent about the future except to say that gold “will resume its reserve role in some capacity, boosting its price considerably.” Others have suggested that gold constitute about 50% of the basket of currencies that will make up the SDRs.

 

I agree that the US and particularly its Federal Reserve Bank, to which the world has outsourced its monetary policy, have been not been responsible as a reserve currency nation. Even the Obama Administration seems not to be willing to engage in making domestic and international monetary policy part of its New Foundation thinking and action.

 

Rather than going back to the gold standard, humanity is to go forward to a commodity standard that is based upon the avoidance of CO2. This 21st century commodity could anchor the nations’ currency, so that stable exchange rates are possible.

 

Besides this monetary case for a carbon-based international reserve currency such as the Tierra there is a strong ethical argument to be made. By having the carbon standard and its Tierra come into existence by the cap-and-share approach in which all adolescents and adults in the global North and South are given equal amounts of carbon emissions permits this transformed international monetary system is rooted in equity. Discussions are taking place of having UNEP Review “whole world” approaches such as the cap-and-share approach  and consider their effectiveness towards the “nation by nation” approach that is now being used (rather ineffectively) in the climate negotiations. There is a global distributive and procedural justice struggle going on which, if appraised of the equitable Tierra monetary system that would support it. The ethical case for the Tierra Monetary Paradigm is a strong one, even stronger than its monetary, financial, economic and commercial and global governance case.

 

The financial case for the introduction of the Tierra as a reserve currency and later on as a vehicle currency can be found in the equitable infusion of liquidity in the world wide finance system. This liquidity that is not based upon loans and debt accumulation, would also greatly contribute to the financing of important infrastructure programs and of mitigation and adaptation measures during this climate crisis.

 

The economic case of the Tierra Monetary Paradigm is based upon the fact that the allocation of Tierras are directly going into the real economy where they can be spent either as reserves or as transactional funds to be used domestically or for the importation of necessary goods and services. The present monetary, financial, economic systems that enrich the few, impoverish the many and imperil the planet would not control those funds, so that they cannot make money out of the Tierras and set up a shadow financial system.

 

The commercial case for the Tierra and its fixed exchange rates is clear: international trade and tourism are able to plan based upon a price system that is anchored in stable currencies.

 

The global governance case for the Tierra Monetary Paradigm rests upon the establishment of a UN Monetary Board for the Tierra as a reserve currency and UN Central Bank for the Tierra as world vehicle currency. It would build upon the proposed Global Economic Coordination Council proposed by the UN Stiglitz Commission in June 2009. The IMF into which the dollar is cemented is considered not to be able to transform itself for this transformational carbon based approach. Its SDR is considered a transitional reserve currency till the time that active citizens and effective states evolve it into the Tierra currency.

 

In summary, the Tierra system which reflects a paradigm shift in monetary economics is ready for further study and debate, knowing that it presents a pathway, not a blueprint, to solving the present economic and climate crises, or, in longer time frame perspective, to solving the financial and ecological indebtedness among nations in the global North and South. To orient this debate in respect to economic theories, it can be considered to be Keynesian in the way that Sidelsky and Mishkin have interpreting him, i.e. the enabling role of government. This interpretation stands in marked opposition to the Austrian School of Economists where the market system is considered to give direction. (Ron Paul’s End the Fed 2009 is based upon this approach as it is expounded by the Ludwig von Mises Institute.) In either approach we have Nobel Prize winners: Friedrich von Hayek in 1974 (together with Gunnar Myrdal) and Robert  Mundell and Joseph  Stiglitz, respectively in 1999 and 2002. While the cap-and-share approach and its equitable allocation of carbon emissions permits is the primary pillar of the Tierra Monetary Paradigm, a secondary pillar is its emphasis of having the money creation function removed from a privately owned banking system and their central banks to the public sector. This means that rather than pursuing their regulation they would become utilities without the exorbitant privilege of a fractional reserve system. The latter would spend money into circulation for real economic activities without creating debt and even charging interest. In a transitional phase these public banks such as they are in operation in North Dakota and Alberta Canada would operate in a diversified financial services structure where they cooperate rather than compete with their privately owned counterparts and other community-controlled financial institutions.

 

Oct
01

The Urgency of a carbon-based international reserve currency

Post By gaia1 in Tierra Currency

Economic imbalances in the nations’ financial balance of payments are, to a great extent, caused by an inadequate international monetary system that is based upon a national or regional reserve currency. This was recognized by the UN Stiglitz Commission’s report at the UN June 2009 Conference and avoided by the two G20 summits of 2009. As long as these deficit and surplus imbalances continue, as long as huge speculative capital flows slush around the globe without proper control and as long the free flow of capital is equated with freedom from sovereign control, the world financial and economic systems will be unstable and both people and planet will suffer.

 

Ecological imbalances where the global North has used up a substantial part of the Earth’s environmental space and continues to do this, often by wasteful consumerism, are as significant as economic imbalances. The main difference is that they are not recognized as such. Though a large part of humanity is finally becoming aware of the climate crisis the discourse is not framed in terms of ecological indebtedness and contrasted with financial indebtedness, let alone in terms of a search of an integrated solution.

 

There is a great urgency to integrate the economic and climate crises because the already unacceptable status of the present monetary, financial, economic systems that enrich the few, impoverish the many and imperil the planet is getting more unacceptable with ever great costs to people, species and planet.

 

This can be done not by re-forming but trans-forming the present monetary, financial, economic systems, starting with the international monetary system which is the glue of the other two systems. That monetary system’s crucial or pivotal element is the currency standard that determines exchange rates which in turn determine the stability of trade and investments activities. The lack of a viable international currency standard leads to currency speculation, particularly in a financial philosophy that equates free flow of capital with the absence of control by public authorities.

 

Keeping the US dollar, euro, yen or the RMB as reserve currencies keeps the instability in the international monetary system. They will always be connected with a national or regional currency that fluctuates. We cannot continue thinking in this way and we have to build on the works of Nobel Prize winning economists like Robert Mundell(1999) and Joseph Stiglitz (2001). We also have to start thinking in a “whole world” fashion rather than only nationally or regionally in both the economic and ecological fields.

 

Part of that “whole world” approach to solving our economic and climate problems is the acceptance of the cap-and-share approach where all individuals above 15 years of age are allocated their carbon emissions permits or domestic tradeable quota as proposed by the Tyndall Centre. Once this equitable decision is made, a carbon standard can be developed that would become the anchor of a transformed international monetary system. Nations can declare to a UN Monetary Board the parity of their currencies to this stable, non-national standard.

 

The more  I observe the unwillingness or inability of G20 nations to come to grips with their economic imbalances, particularly the establishment of a stable, non-national reserve currency, and the more I observe how the “party by a party” approach in the climate negotiations is not going to reduce the ecological imbalances and do the job of drastically reducing the greenhouse gas emissions, the more I feel the urgency of having the Tierra Monetary Paradigm considered as a realistic alternative to the reformist approaches in dealing with both the economic and climate crises.  Perhaps the present recession and the extraordinary weather events of the last couple of decades are not devastating enough to make leaders consider transformational alternatives such as the Tierra Monetary Paradigm.

 

While the economic and ecological chairs are being rearranged on the Titanic, the planetary ship of Earth courses towards catastrophe. In the meantime, millions and millions of more people and other fellow creatures suffer and dozens of main ecosystems deteriorate,  further increasing that suffering of all living beings.

 

 

 

Sep
29

Zoellick’s Speech and the Tierra International Reserve Currency Unit

Post By gaia1 in Tierra Currency

The Worldbank’s president’s speech yesterday at the John Hopkins University’s School of Advanced International Studies shows that this former US trade representative understands the political nature of global change. In his “After the Crisis?” he challenges the international community not to give in to complacency, but go for real change in the global monetary, financial, economic systems. He particularly singles out the G20 to start acting as a “Steering Group” “across a network of countries and international institutions” which would UN bodies. He did not mention the need for a UN Global Economic Coordinating Council, proposed by the UN Stiglitz Commission.

 

After posing the question “Will the U.S. dollar remain the predominant reserve currency?” he dissected its chances realistically and came out with a diminished role for it. He mentioned the euro and Renminbi as real competitors. “Countries and markets may also experiment with financings denominated in Special Drawing Rights—or SDRs--which reflect a portfolio of major currencies.”  

 

Having listed a good number of issues which included climate change, he states that “Each topic is important on its own. But each interconnects with the others.” It is the main strength of a carbon-based international reserve currency like the Tierra that integrates the two major crises and challenges of our times, i.e. the economic and climate crises or the financial and ecological indebtedness of nations in the global North and South.

 

Its two main pillars of the cap-and-share approach and debt-free banking systems are able to bring about the integration of the climate and financial challenges. In its cap-and-share approach it would allocate carbon emissions permits to each person 15 years and over, using the Domestic Tradeable Quotas system as proposed by the Tyndall Centre, one of the top climate research organizations in the world. The cap-and-share approach is also based upon the Greenhouse Rights Development movement where the Responsibility and Capacity Index of countries is measured for equitable sharing.

 

The main difference  of the Tierra international reserve currency approach with those and other alternative approaches to the climate crisis which take a “whole world” approach rather than the “party by party” one currently in use is that it institutionalizes this sharing based upon responsibility and capacity within the world’s monetary system. As part of such carbon-based international reserve currency and its associated balance of payments which includes both financial accounts and an ecological account it is considered necessary, or at least very highly recommended, that the function of money creation and control be reclaimed by the public sector.

 

It is obvious that both pillars of this Tierra Monetary Paradigm present a transformational monetary change rather than a reformist change on the fringes of the international monetary, financial, economic systems.

 

 

 

 

 

Sep
23

Cap and Share Environmental Space! Reclaim the Creation of Money!

Post By gaia1 in Tierra Currency

The high-level climate crisis meeting in New York yesterday and the forthcoming G20 Summit in Pittsburg on Thursday and Friday are not going to be the momentous pivots that they should be. Au contraire, they can lead an optimist to start despairing.

 

The one point of light that is being lit during this pivotal week is the realization, on a government level, that the GDP is not a good indicator of a nation’s well-being according to an article in today’s New York Times. Ever present economist Stiglitz advises the world, in a report commissioned by Mr. Sarkozy, not to equate market performance with social performance.

 

After this critique on accounting/measuring of a nation’s or the world’s economy, the question now becomes one of finding the determinants of this new social performance accounting or of a realistic quality of life index.

 

Two main scourges that prevent quality of life of people and well-being of the planet are the present economic and climate crises.

 

Though stock markets are going up, the economic crisis is not over. Complacency has set in based on the old GDP standard, but the quality of life standard does not give us any reason to be complacent given the deplorable economic and social situation of tens of millions of people in the global North and South. G20 Summiteers will mostly engage in platitudes rather dealing with the real causes and solutions of the world’s economic predicament and they will not make fundamental connections with the climate crisis.

 

The climate negotiations are stalled with a 200 page working document with hundreds of bracketed spaces that demand decisions. In the meantime GHG emissions, though a little bit down on account of the recession, will continue to go up instead of being brought down. In the meantime, millions of people suffer droughts, floods, more hunger and ill health. They are anxious about the future.

 

In order to overcome the economic and climate crises the international community--not only governments-- has to engage in a paradigmatic shift in thinking, followed by a paradigmatic shift in action. Given that the climate crisis is the more severe crisis of the two because of its long-term challenge and its impact on the economic crisis, the international community, i.e. each of us is asked to make a major climate decision that goes beyond present cap-and-trade thinking.  We have to decide that the environmental space that is still available is going to be shared equitably: equal amounts of carbon emissions permits to all persons over 15 years of age. Obviously, people in the North become ecological debtors and those in the South ecological creditors. Now an ecological balance of payments has to be worked out over a certain period of time and payments have to be made somewhat in the same way as payments for a financial mortgage are being made.

 

One important way of working out that ecological balance of payments is the introduction of carbon-based international reserve currency that would replace the present reserve currencies. This currency, like a SDR that would be carbon-based, would become part of a nation’s balance of payments and function as a means of payment of both financial and ecological debts. Its adjustment mechanism would be an International Clearing Agency, probably not within the IMF, that would clear both a nation’s ecological (CO2) and financial credits and debits. Nations and regions would keep their own vehicle currencies, the exchange rate of which is based upon the value of the carbon-based international reserve currency. These fixed exchange rates would diminish currency trades and particularly currency speculation.

 

Making the world economy grow within this equitable distribution of environmental space with its accompanying redistribution of financial resources that would provide funds for development and mitigation and adaptation measures is a necessity. It would consist of the steady-state development of local communities into sustainable communities in global North and South, leading to the development of the real economy rather than the shadow economy of an overpowering financial sector.

 

It is from this financial sector that public authorities have to reclaim monetary sovereignty and management. The G20 will propose stronger regulation in the various asset markets, but, given present trends of complacency and return to business as usual in compensation and derivatives trading, this is not enough. Public authorities have to reclaim their responsibility of a nation’s money creation. The privately owned banking industry which has again lost the citizen’s confidence cannot drive the world economy into another recession which will be of an even greater magnitude next time because those Too Big To Fail (TBTFs) have become bigger. The privilege of creating a nation’s money, of determining its money supply, the direction of its economy and of setting its interest rates has to be withdrawn. Banks are to become utilities which can compete, on a level playing field, with one another and other industries without gambling with a nation’s monetary system.


 

Jul
02

VIRTUAL CURRENCIES, CASHLESS EXCHANGE SYSTEMS AND MONETARY CONTROL

Post By gaia1 in Tierra Currency

VIRTUAL CURRENCIES, CASHLESS EXCHANGE SYSTEMS AND MONETARY CONTROL

2 July 2009

 

David Barboza reported in the NY Times of July 1 that China is putting new limits on virtual currencies. The buying and selling of these make-believe currencies has become so widespread that the Chinese authorities fear it will affect the real economy. Smaller gaming companies have even set up virtual sweatshops, cramped quarters where young people play online games to earn credits that the companies then sell at profit to overseas customers in the region or even the US.

 

Besides this somewhat shadow form of cashless exchanges, there are numerous alternative currency and trading systems such as time-dollars and other Local Exchange Trading Systems (LETS) that make a local economy monetarily self-reliant. It was during the difficult times in the 1930s that several towns developed their own currencies according to the Gesell’s method and that a coal company introduced its own scrip, called Wara. According to former Belgium central banker, Bernard Lietaer, “complementary currencies facilitate transactions that otherwise would not occur, linking otherwise unused resources to unmet needs, and encouraging diversity and interconnections that otherwise wouldn’t exist.” Wikipedia reports  that,  in the US, about half a million businesses are linked to about 700 barter exchanges which result in $8.5 billion in cashless trade. “It seems that this type of trade rips along at 15% a year, three times the speed of dollar commercial exchanges.”

 

How have these forms of cashless money to be evaluated? Thomas Greco shows the strengths and weaknesses of both these forms and the official currency that is used as legal tender with which you pay your taxes and other official bills and charges. In the process of that discussion he makes clear what money is and that the creation of money is not to be in the hands of privately owned banks, but is to be vested in the public sector. However, I want to evaluate these cash and cashless exchange systems in terms of Tierra monetary paradigm which is based not on gold, but on a carbon standard.

 

Given that the Tierra reserve/vehicle currency is an official currency that can be used internationally besides one’s own national currency it functions as a legal tender currency between nations and other international actors. The more people and businesses can engage in productive economic activities, either nationally or internationally, by using legal tender or reputable cashless exchange instruments, the better for them.

 

As regards monetary control of both cash and cashless exchanges on the national or international level I would favor an international clearing house, so that everyone is able to understand the amount and type of economic activities that are going on. If governments consider this information to be socially or ecologically relevant in making monetary and financial decisions, they are to subject their proposals to appropriate deliberative and consultative procedures.

 

 

 

 

 

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