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 21^st 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.

 

 

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.

 

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 20^th century German sociologist Max Weber elaborated in  Politics as a Vocation. He considers politics to be a “strong 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.

 

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.

 

 

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.

 

 

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.

 

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 21^st 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.

 

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.

 

 

 

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.

 

 

 

 

 

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.

 

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.

 

 

 

 

 

Is monetary transformation possible within 5 years?

Post By gaia1 in Tierra Currency

 

Accepting a carbon-based international reserve currency based upon a carbon standard with its fixed exchange rates together with a balance of payments system that includes a carbon account is an example of monetary transformation. It would transform the international monetary system, because it would overhaul a system of flexible exchange rates, of national or regional reserve currencies. It would introduce an international monetary system that would deal with both ecological and financial indebtedness.

 

Changes of such magnitude have to be seen in both historical and present perspectives. Karl Polyani’s thesis that increased democratization led to major changes in market conditions is helpful here. His thesis can be applied to our modern times where civil society is increasing its influence in international decision-making at the various UN conferences, starting in the 1992 Earth Summit, and even at organization such the IMF, World Bank and World Trade Organizations that are actively seeking its input.

 

Economics and political science professor Barry Eichengreen in Globalizing Capital. A History of the international monetary system points out that nations cannot devise their monetary systems by themselves or independently. Their independence is always part of “network externalities that characterize international monetary arrangements.” The system itself displays “path dependence”. It cannot deviate too much of the path that has historically been followed. These two characteristics imply that reform, let alone transformation, of the international monetary system will always be a “collective endeavor.” That most of the time that collective endeavor was not present is a fact of history. However, there are also counterexamples where nations cooperated such as at the Bretton Woods Conference and at the formation of the European Union.

 

Can the UN Conference on the World Financial and Economic Crises and its Impact on Development at the end of June 2009 and the ongoing negotiations in preparation for the Copenhagen Climate Treaty Conference of December 09 be the beginning to have the above monetary transformation considered to be a pathway of bringing the financial and climate crises together? Is the voice of civil society strong enough to have nations considering ecological and financial indebtedness together, so that their common property of owning to one another either ecological or financial debt brings them to negotiate both indebtedness at the same time? If that perspective were accepted and acted upon during 2009 and, particularly, in preparation for the proposed Earth Summit of 2012 the proposed monetary transformation of the Tierra reserve currency could become a possibility. Perhaps, within ten years the reserve currency may have evolved into a global vehicle currency with a World Central Bank as proposed in Tierra International Monetary Union (TIMU) architecture.

 

Tierra Proposal Submitted to Open Government Dialogue

Post By gaia1 in Tierra Currency

LET THE PROPOSED NEW INTERNATIONAL RESERVE CURRENCY BE BASED UPON A CARBON STANDARD!

 

June 3, 2009

 

The UN General Assembly President's Commission on Monetary and Financial Crises with its chair professor Stiglitz from Columbia University has proposed a new international reserve currency in its March 19 report. China and the other BRIC countries have been clamoring for a “supra-sovereign reserve currency” which would replace the dollar, euro and yen. It would probably be based upon a basket of currencies and be like the Special Drawing Rights (SDRs) that the IMF is managing.

 

Let the Obama Administration apply its New Foundation philosophy to the international monetary system and initiate the discussion about the US New Monetary Foundation by discussing  this carbon-based international reserve currency, called the Tierra, that could be a major means to combat the climate crisis. In that discussion could also to be included earlier monetary ideas on this site, i.e. natural money, returning the money creation function to the public sector away from the privately owned banks and federal reserve.

 

Let me list the advantages and disadvantages for the US of keeping the dollar as the international reserve currency and also for those countries in the South who are forced to buy US securities at very low interest rates. Let me then list the benefits and costs of  having the Tierra international reserve currency become the international reserve currency upon which each country can set the parity of their currency. For more information, see www.timun.net.

 

NOTE THAT THIS IS THE MOMENT OF OPPORTUNITY FOR MONETARY AND ECONOMIC TRANSFORMATION: THE FATAL FLAWS OF THE PRESENT MONETARY, FINANCIAL, ECONOMIC SYSTEMS ARE IN FULL VIEW IN THIS RECESSION WHILE AT THE SAME TIME THE WORLD FACES THE ENORMOUS CHALLENGES OF THE CLIMATE CRISIS AND PEAK OIL.  THE WORLD CANNOT AFFORD A REPEAT OF THIS GLOBAL RECESSION AND TO IGNORE THE REAL CRISES THAT ARE AWAITING US!

 

There are advantages and disadvantages  to the US of maintaining the dollar as a reserve currency.

Advantages for the reserve currency issuing countries.

 

·        Seignorage: the reserve currency country can have an over-evaluated currency with which it can buy up other countries’ assets. De Gaulle in the sixties resented American businesses buying up French industry on the cheap, exploiting their privileged position of seignorage. (Historically, seignorage made the king debase its currency by setting the value of its coin higher than the value of precious metals of which it was made. The term itself derives from the alleged feudal custom that  the lord of the manor could have first dips  on bedding the girls of their wedding nights.)

·        short-term gains by having other nations pay low interest on raising of money for payment of budget deficits or war operations.

·        Saving of millions of dollars by not needing to go to other sources of borrowing and printing more money of its own currency

·        International standing by having its currency accepted as a seal of approval of the strength of one’s economy.

 

Disadvantages for reserve currency issuing countries:

·        Contributes to instability of international monetary system because national currencies fluctuate in value, thus upsetting the international trade system. Inflation of the US dollar makes oil prices go higher and terms of trade worsen for other commodity exporters.

·        Creates unfair disadvantage by being able to borrow money not for a certain interest rate costs as other nations have to do. It has been calculated that this foregoing of paying interest has resulted in billions of dollars.

·        Cannot adjust exchange rates without upsetting other nations’ monetary systems that use the dollar as benchmark, this contributing to unstable financial conditions.

·        Constitutes the so-called Triffin Dilemma, i.e. the issuing countries of reserve currencies cannot maintain the value of the reserve currencies while providing liquidity to the world, leading to global inflation or lack of global liquidity.

·        Contributes to recurrent crises in Asia, Latin America and Eastern Europe

·        Leads to chronic and growing US payments deficits (with their associated deflationary impact)

·        Leads to global crisis when the reserve currency country’s financial sector is in crisis as it is happening in 2008-10.[i]

·        Globalization demands a global approach which involves some ceasing of national financial sovereignty; not doing this leads to problems for all.

 

 

There are also advantages and disadvantages for those nations that use a reserve currency such as the US dollar

 

Advantages for nations in the South:

·        access to foreign exchange assets in the face on the absence of global reserve currency

·        stable exchange rate, as long as the reserve currency does suffer from inflation or appreciation

Disadvantages for the nations in the South:

·        nations in the global South have to spend scare national financial resources to purchase dollars for which they get only a very low interest rate payments. In the meantime they have to forego the opportunity costs of these local funds in building a strong economy locally.

·        such parking of a valuable funds at the IMF could be avoided if the nations got together to make SDRs wider available, and, in last instance, to establish a democratic World Central Bank where all nations have voice and representation.

 

Benefits of carbon-based international reserve currency :

·        It uses the ecological and financial indebtedness of countries in the global North and South as the background to combat the climate crisis.

·        It provides an institutional mechanism for the funding of development and climate mitigation and adjustment measures.

·        It increases equity, sustainability and stability in the monetary system by removing nation- and credit-based reserve currencies

·        It increases  energy efficiency by having to pay down one’s ecological debt in the global North and by receiving more Tierras in the global South

·        It would provide an opportunity to re-evaluate life styles where being more is considered more essential than having more

 

Costs:

·        Emotional costs of transformation

·        Costs for educating for this transformation

·        Upfront costs with long-term benefits

 

The Open Government website asks to indicate why the idea is important. I wrote: The international monetary system is the glue that binds the financial and economic systems together. By changing the nature of its reserve currency to combat the climate crisis it not only bring equity and sustainability to the system,  but provides the transfer of resources that ecological debtor countries in the North owe to their ecological creditor countries in the South.

 

I ask you to vote promising on http://opengov.ideascale.com/akira/ideafactory.do?discussionID=2294

 

Also go to  http://opengov.ideascale.com/akira/dtd/3648-4049 and vote promising.

 

Africa and the Climate Crisis

Post By gaia1 in Tierra Currency

 

An important meeting took place during this last week in May in Nairobi where 300 African negotiators, specialists and CSOs and over 30 African Ministers of Environment attained a major milestone on the road for combating climate change on the continent. The Nairobi Declaration adopted at the Special Session of the African Ministerial Conference on the Environment (AMCEN) On Climate Change arrived at a consensus and highlighted its major challenges and opportunities in the negotiations for amore equitable climate regime.

The Declaration provides African countries with a platform to make a strong
case for support at Copenhagen in December 2009. This support, particularly from the international community, should be based on the
priorities for Africa, which include adaptation, capacity-building,
financing and technology development and transfer.

The African Ministers of Environment have agreed to mainstream climate
change adaptation measures into national and regional development plans,
policies and strategies. In doing so, they will aim to ensure adequate adaptation to climate change in the areas of water resources, agriculture, health, infrastructure, biodiversity and ecosystems, forest, urban management, tourism, food and energy security and management of costal and marine resources. [i]

Also during this week the IMF announced that out of its $1.1 trillion fund around $11 billion will go to sub-Saharan African countries in Special Drawing Rights or SDRs. These SDRs can be used to boost their foreign currency reserves and stabilize their currencies, so that currency speculators are unable to cause economic turmoil. These SDRs are particularly helpful as reserves because these countries need not to spend dollars, euros or yens (at very low interest rates) to maintain their foreign exchange reserves and can allocate them for development or climate mitigation and adaptation measures. These SDRs are also particularly welcome given that export income from cotton, copper and oil has fallen drastically on account of the recession in the North and given that investment flows dropped significantly because of greater risks in weakened economies. [ii]

While a strong unified negotiating position for Copenhagen and the significant allocation of SDRs are promising developments, I suggest that African nations consider adopting the Tierra Solution as an additional major way of financing for both development and climate mitigation and adaptation measures. By emphasizing the connection between ecological and financial indebtedness they become ecological creditors and financial debtors. As ecological creditors they are able to argue for a modified balance of payments where carbon accounts and financial accounts are simultaneously listed and accounted for.  Adopting a carbon-based reserve currency of the Tierra which basically is an ecological IOU would lead to the adoption of this combined balance of payments. Using the cap-and-share approach to allocate carbon emissions permits on an equal basis to the world’s adults and adolescents, people in the global North who are ecological debtors and financial creditors would transfer resources via their carbon account in order to balance it.

 

The question whether the above SDRs are not doing the same for Africa as the proposed Tierra can be answered with a yes and a no. It contributes to the African nations’ reserve positions, but it is done in ad-hoc way by an institution that does not reflect the world’s peoples. Moreover, it is still done in a neo-liberal philosophy of structural adjustments and conditionalities that foster the rich nations. By having a carbon based international reserve currency like the Tierra that is part of a nation’s balance of payments and administered by a UN Monetary Board several of the shortcomings of the SDR arrangement can be overcome.

 

Monetary transformation in the short and long term

Post By gaia1 in Tierra Currency

 

 

 

The title of book that I have been working on for almost half year called TIMU: The Transformative Approach to Monetarily  Solve the Economic Crisis by Solving the Climate Crisis  has been changed into The Tierra Solution: A Monetary Proposal to Deal with the Ecological and Financial Indebtedness in the Global North and  South. This change in title points to a new focus in the book where monetary transformation is shifted from the long term or ultimate goal of a transformed international monetary system to the  short-term goal of having the carbon-based international reserve currency of the Tierra accepted as a main source of funding for development and mitigation and adaptation measures in the global South. Thus, both countries in the global North and South can settle their ecological and financial accounts by using elements of an international monetary system. This Tierra Solution is based upon the principles of fairness and sustainability. It is fair because the ecological debtor countries in the global North have to settle their debts by transferring resources to ecological creditor countries in the global South. It is sustainable because the Tierra becomes part of the carbon account in a modified balance of payments and thus institutionalized.