Cas Mudde, an associate professor in the School of Public and International Affairs at the University of Georgia and a co-author of “Populism: A Very Short Introduction” wrote an excellent opinion piece in the New York Times of January 26, 2017 about “the-radical-rights-united-front?” The article also made referrence to a NY Times’ summary of the eight major political right parties in Europe, several of whom have high hopes in their countries’ elections buoyed political rightist in the USA. The Western world is in throes of major confusion in these liminal times where old verities and institutions are fundamentally questioned and new ones have not yet emerged. The following proposal with some small modifications is boldly presented as a possible 21st century approach in the comment section of the Mudde Op-Ed piece.
These populist, anti-emigrant and nationalistic parties which also include the Trump party have to be shown up for their extreme and dangerous biases and, especially, be countered by a progressive vision of an equitable global governance system.
I propose that progressives in the USA, Europe, Latin America, Asia and Africa push for greater monetary unification besides the existing monetary unions such as the U.S. dollar, euro and other regional monetary unions in direct opposition to the right’s direction for national currencies and removing those regional unions. Thus, according the Alternative Party of Germany, the EU becomes “the subsidiary Europe of the free home countries.”
This proposed monetary unification can be conceived to take place when a monetary standard—not the gold standard—can be developed for the 21st century. Verhagen 2012 "The Tierra Solution: Resolving the climate crisis through monetary transformation" proposes the vision of an international monetary union by basing the present unjust, unsustainable and, therefore, unstable international monetary system on a carbon-reduction or decarbonization standard of a specific tonnage of CO2e per person. The conceptual, institutional, ethical and strategic dimensions of such carbon-based international monetary system are updated at www.timun.net. Climate expert Bill McKibben wrote about this proposal: “The further into the global warming area we go, the more physics and politics narrows our possible paths of action. Here’s a very cogent and well-argued account of one of the remaining possibilities.”
David Jolly in the NYTimes of April 2, 2013 entitled “Unemployment in Euro Zone Reaches a Record High” cites a lot of statistics showing the dire economic situation in both Euro and other European countries. The sad thing is that the future does not seem to bring realistic improvement in the millions unemployed because of non-working austerity policies.
Though in the short term those European economies can improved by stimulation as opposed to austerity, in the medium and especially in the long term, serious deep rethinking is needed.
Such rethinking should start with some agreement about a basic values framework that would undergird such thinking. A new monetary, financial, economic and commercial edifice cannot be built on the loose sand of unclarified and vague values.
It is such value frame work of sustainable communities in the global North and South that is presented in 20012 The Tierra Solution proposal. Its value system is a, not necessarily the, value system that would respond to the needs of the global monetary, financial, economic and commercial systems.
A second element beside an explicit value framework for the deep rethinking that is needed is the need for the integration of these global systems, a challenge that was lifted up during the June Rio Earth Summit. The Tierra Solution provides such integration by transforming the world’s most basic system of monetary management. This transformation takes place by basing the international monetary system on a carbon standard, i.e. a very specific tonnage of CO2e per person.
In his April 16 New York Times column entitled “Europe’s economic suicide” with its summary statement of “Trying for a second Great Depression” Paul Krugman points to two solutions after arguing that the present economic and social condition in Europe cannot go on. One of them is exiting from the euro, the other, if “European leaders really wanted to save the euro” is quantitative easing like the USA did and is doing. There is a third solution: it would keep the euro and its monetary union intact and places its resolution in truly global perspective.
Quantative easing (QE) would beneficial to all nations if they all agreed to do this at the same time and within a clear set of principles. It is problem if one powerful nation or group of nations engages in QE by themselves and when there are no rules. Thus, QE by the U.S. Fed makes American and other investors get cheap money which they will invest in commodity markets or in derivatives of those markets. The end result is monetary, financial and economic instability of the capital flow importing country, further destabilizing the global monetary, financial, economic and commercial systems.
What kind of rules or global architecture could promote healthy QE?
Given that the international monetary system, like glue, binds together the monetary, financial, economic and commercial systems and can be considered to be the linchpin of those systems, the answer is to be found in this global monetary system. By establishing a Global Central Bank nations that would monitor, regulate and engage in QE, nations would have an ample source of financing, particularly if the new financial system would be based upon money or credit and not on debt and if the privately-owned banking systems would operate on 100% reserves, i.e. do not engage in money creation.
If nations would become serious about the threat of a global warming catastrophe, they could base this new international monetary system on a carbon standard. In that way nations that are seriously decarbonizing their societies would strengthen their economies and their associated currencies.
Details of why this alternative is to be taken and how it could come to pass are described in Verhagen’s The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation which will be on the market at the end of this month. The publication will coincide with the medium budget plans EU nations have to submit at that time and thus its solution could become part of the discourse of alternatives to the euro crisis which is causing such social havoc with its impossible austerity budgets.
Following the December 9th EU Summit, European leaders are using a threefold approach to stabilize the euro crisis. The first prong of this strategy is provided by the corrective measures to be enacted by euro-area national governments in the context of sharpened EU surveillance and disciplining sanctions. The second prong or line of defense is offered by a potential financial firewall that a stepped-up IMF can erect around the vulnerable sovereigns of the euro area, such as Italy and Spain, through lending programs with conditionality. The third and last line of defense would be the ECB itself which would take the burden of any residual systemic pressures that the two previous layers would be unable to stabilize.
If these three lines of defense were to synergistically work—still a major question—the euro crisis could be stabilized for the moment, but the crisis itself would not be resolved. There is a bevy of other factors that are needed to be considered to produce an equitable, sustainable and stable currency for the Euro zone and non-Eurozone European countries.
One of them, and probably the most important factor to be considered, is the Euro zone’s connection with the international monetary system of which it is an inextricable part. As long as this international monetary system remains dysfunctional, the euro crisis cannot be resolved on a permanent basis of equity, sustainability and, therefore, stability. The big question becomes how European and other global leaders are able to make this international monetary system more functional, equitable, sustainable and, consequently, more stable.
Time has come to add to the three lines of defense for stabilizing the euro crisis a fourth component, i.e. a proactive policy development program that considers the reintroduction of a monetary standard which would remove the gross volatility, the hallmark of the present system. Rather than basing this standard on a gold—be it pure or flexible—standard, it can be based upon any material or immaterial standard that, John Maynard Keynes’ terms, is considered valuable and accepted as such by a local community or state. The Tierra Solution proposes to take carbon as a standard—a specific amount of tonnage of CO2e per person—, given that decarbonization of societies is humanity’s greatest challenge in the 21st century in coping with the catastrophic effects of an ever increasing amount of CO2e emissions.
There seems to be general agreement that the six central banks’ injection of dollar liquidity into the Eurozone banks is only a temporary measure and does not deal with the real sovereign debt problems of several of its member states. Even the strengthened euro is back again after one day to its pre-injection level.
There are at least two pathways that will be more effective in making the Eurozone sustainable. The first one is well explained by Ellen Brown’s article in http://www.huffingtonpost.com/ellen-brown/the-ecb-fiddles-while-rom_b_1117193.html?view=print&comm_ref=false entitled “The E.C.B. fiddles when Rome burns”. In it she shows that article 123, paragraph 2 of the Lisbon Treaty permits the ECB to lend to publicly owned banks. By treaty cannot lend directly to its member governments. She thinks that if France had borrowed from its own publicly-owned or central bank rather than from privately-owned banks starting in the seventies, it would have saved enough money by not having paid interest and by receiving dividends of its central bank that it could be debt-free now.
So, why is this public bank option not being used? Why should Eurozone governments be forced to borrow from privately-owned banking systems? Important questions that can not be answered here, because the second pathway has to be presented now.
The public bank pathway would be part of a larger conception of the global monetary, financial, economic and commercial systems. It is based upon an international monetary system that is transformed by the adoption of a carbon monetary standard. There are quite a few observers, many of them in the Republican and Hayekian fold who advocate sound money by way of a pure or flexible gold standard. They also understand that the international monetary system does not work without a proper standard. What the carbon standard does is not only making the international monetary system function properly as glue and lubricant of the other global system, but, as importantly, pushes nations to decarbonize their societies and thus combat the climate crisis, humanity’s major challenge for this century. Adopting this carbon-based international monetary system called the Tierra Fee & Dividend system or the Tierra Solution nations could spend money, not debt, into circulation for their economies and would not have any financial difficulty in financing the necessary mitigation and adaptation measures to combat the climate crisis. However bad the sovereign debt situation is in the Eurozone, the US and elsewhere, the drama that is being played out in the UNFCCC Conference in Durban might be more damaging in the long run for people, species and planet. What does it take for government, business and civil society to take the steps towards the Great Monetary Transformation and making monetary justice the guiding principle of global governance?
I believe with editor and author Bryant Harrison McGill who said, “Yearning for the seemingly impossible is the path to human progress”.
In addition for Reuters piecing together a “picture of patchy preparedness for the possible demise of the 12-year-old euro currency” (http://www.reuters.com/article/2011/11/29/us-euro-zone-contingency-idUSTRE7AS0H020111129?feedType=nl&feedName=ustopnewsearly) Reuters could also put together a picture of alternatives not only to the euro problems, but to problems in the international monetary system. Thus, a picture could emerge where the banking system would not engage in money creation, where the international financing system is a credit- rather than debt-based system and, finally, where the international monetary system which as glue binds the global systems together adopts a monetary standard, not a pure or flexible gold standard, but a carbon standard. Adopting a carbon standard would also resolve humanity’s major challenge of the 21st century, i.e. the climate crisis. Curious how this would work? See www.timun.net and the forthcoming Cosimo book THE TIERRA SOULTION: Using a transformed international monetary system to combat climate change and advance low carbon and climate resilient development.
Yesterday Greek Prime Minister decided that the Greek people will vote on the financial bailout that was hammered out over several weeks and months. This referendum on the bailout assumes that the Greek people are versed in the ins and outs of the bailout, for themselves, the Greek nation, the euro zone countries, the European Union, and the world monetary, financial, economic and commercial systems. Instead of educating the Greek population about those ins and outs, the Greek government with its weak majority in parliament devolved its responsibility to the people who will vote no, because they will not include the wider regional and global consequences of their vote.
However, the lack of proper monetary education is not only reserved to Greece. Several organizations such as FAME (Foundation for the Advancement of Monetary Education http://www.fame.org/index.htmand the Lehrman Institute and others in the USA are hard at work to convince people that fiat money is a fraud and that the international monetary system is to be based upon a commodity money such as gold and silver. Though they are rightly point to the severe shortcomings of the international monetary system, their proposed solution of returning to the gold standard without considering other alternatives can also not be considered real education where people are led forth to considering pros and cons of various approaches.
There is a great dearth of such balanced monetary education, not little due to the factthat monetary economists constitute only 1% of the economics profession. Economics education on graduate, undergraduate and high school levels does not deal in any depth with the issues of money creation and control, balance of payments, currency manipulation and speculation, reserves currencies and the workings of the global reserve system, etc.,etc. In such poor educational context the power of corporate-sponsored think tanks becomes enhanced.
The volatility in the monetary, financial, economic and commercial systems is detrimental in all those systems and works against raising prosperity for all that is socially and ecologically beneficial. Given that the international monetary system as glue and lubricant of those international systems is the linchpin for producing that prosperity, it is most important that far greater emphasis is to be placed on monetary education which shows the ins and outs of the various alternatives of the present system. That system has to be fundamentally changed or overhauled. The Tierra system is proposed as one of those alternatives.
One of the many reasons that the euro is fragile is the fragility of the international monetary system. The latter system has no standard and is subject to wide currency manipulation and speculation and widely fluctuating exchange rates to mention its most important shortcomings. This external monetary pressure on the euro is not often considered in analyzing its weaknesses.
Other reasons for the fragility that are more locally caused are the great disparity in the economies of its 16 members. Its southern tier of countries, particularly Greece, Spain, Portugal and Italy, have for various reasons not kept their fiscal houses in order and have generated high sovereign debt loads. Thus, on May 25, 2010 the euro hit an 8 1/2-year low against the yen and neared a 4-year low versus the dollar. During the month of May alone the euro lost more than 7 percent versus the dollar, the biggest monthly fall since January 2009. The euro's downside targets stood at the recent low of $1.2143 and at $1.2133, a 50 percent retracement of a rally from its all-time low around $0.8225 in October 2000 to its record peak of $1.6040 touched in July 2008.
Note the enormous fluctuations of the euro—100% from October 2000 to July 2008 and 50% from October 2000 in May 2010. Think of the havoc these fluctuations inflict on local residents and business and international trade. The euro system being one of the world’s major currency areas has become so unstable, that markets i.e. investors and gamblers are hesitant to invest in those countries’ economies. They pull backed from their riskier assets, followed by citizens of those southern countries who also pulled back their assets out of their own banks and deposited them in German banks or invested them in US Treasuries. States Kenneth Broux, senior market economist at Lloyds TSB: "Fears are growing that a collapse in confidence could undo the positive growth impulses that are still present, with tensions in money markets resulting in dollar liquidity drying up."
Under the TFD system the euro would be carbon based and convertible with the other carbon-based national currencies in its first phase. In its second phase the euro would be replaced by the Tierra, the carbon-based single global currency. The monetary architecture in both phases would consist of fixed exchange rates within a monetary governance structure of the UN World Central Bank which by exercising its four main functions would provide monetary stability for the benefit of all. This stability is made possible on account of the equity and sustainability of its Articles of Agreement. Given that there will always economic changes locally, regionally and internationally, the Tierra monetary architecture’s exchange rates will fluctuate, but these fluctuations are kept within a short band around its monetary standard. Unlike the ECB, the World Central Bank has the political power to keep its members’ monetary and fiscal policies in check after having achieved a monetary union under the auspices of the United Nations.
This post is the Comment sent to the Economist blogger Charlemagne on May 10th:
This $1 trillion bazooka measure shows the lack of an operating international monetary system that would prevent currency manipulation and speculation that makes fiscal irresponsibility worse.
There is an alternative international monetary system which would also remove the costly global reserve system that costs developing countries some $100 billion annually. It is called the Tierra Fee & Dividend system which would use a transformed international monetary system to combat the climate crisis within a political context where the public sector has reclaimed its role of regulator and driver. It is based upon a carbon-based monetary standard with the accounting unit of the Tierra. It would create carbon-based national currencies with fixed exchange rates anchored on the Tierra. At the appropriate time nations can decide to move to a carbon-based world currency. In both applications of thecarbon-based monetary standard the UN World Central Bank will administer, monitor, regulate and engage in money creation without going through the privately-owned banking systems because they will have become utilities without the privilege of fractional reserve banking. Details of this new transformational system can be found at www.timun.net and the forthcoming book THE TIERRA Fee & Dividend System: A Monetary Approach to Low Carbon and Climate-resilient Development.
THE INTERNATIONAL INSTITUTE OF MONETARY TRANSFORMATION