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Feb
21

The G20 monetary local

Post By gaia1 in TFD system

THE G20 MONETARY LOCAL

February 21, 2011

The G20 monetary local’s schedule in 2011 runs at a snail’s pace from Paris, to Washington, back to Paris and finally arrives in November in Cannes where the so-called “Leaders” board the train that they had left a year ago in Seoul. A short side trip for the local passengers, prepared by France and China, is being organized to take place in late March in Beijing.

Instead of getting some real accomplishments by a G20 monetary express the world has to wait another year before the Leaders are able to solve the financial imbalances that keep the world’s economy muddling along in its own local tracks. At least the G20 continue talking, including having several nations claiming credit according to the reporter of the Vancouver Sun for the achievement of producing a communiqué that is not very different from the last one in Seoul 2010.

Since the closing of the gold/dollar exchange window the international monetary system has become ever more complicated, both technically and politically. The time has come for nations to try to devise a new system that is less complex and where all nations feel engaged because the system would be an equitable, sustainable, and, therefore, stable system.

Proposed is a new system that is based upon a monetary standard rather than floating and volatile exchange rates. The standard would preferably be a carbon-based one in these carbon-constrained times, such as suggested in the Tierra Fee & Dividend global governance system. In the pursuit of such new international monetary system every nation is on new ground and every nation has to think beyond the box of the present system. Thus a commonality exists that could lead to a system that would work for the 21st century.

 

Feb
17

Beyond Monetary Pussyfooting

Post By gaia1 in Transformation versus reform

BEYOND MONETARY PUSSYFOOTING

February 17, 2011

The Urban Dictionary defines pussyfooting as “To act or proceed cautiously or timidly to avoid committing oneself, like a cat circling carefully around something it finds distasteful”. The G20 nations in their last Summit in Seoul and the upcoming one this weekend can be called pussyfooters because they cats circling around something distasteful circle around global financial imbalances and other difficult monetary matters such as volatile exchange rates.

Though many nations in the G20 such as Canada and Germany and at other venues have pointed to need to remove national or regional reserve currencies and have suggested having those reserve currencies transit into SDR substitution accounts, no decisions are taken even in this highly plausible reformist monetary measure.

More radical would be the decision to remove the global reserve system altogether because it costs non-hard currency countries some $100 billion annually and, more importantly, it maintains unjust, unsustainable, and, therefore, unstable international monetary system.

This global reserve system could be removed when nations decide to base the international monetary system upon a monetary standard. Basing such system upon carbon standard nations would be able to find an integrated solution to the major problems of an unstable international monetary system, the climate crisis and unsustainable development. The carbon standard would push nations to decarbonize their societies because the value of their currencies would be determined by the extent of their decarbonization.

Presently the 192 nations of the UN system are preparing for the Rio 2012 Earth Summit. One of the three objectives of that Summit is “Assessing new and emerging challenges”. It would be most appropriate to have the Rio Summit tackle this monetary challenge. A first step would be the passing of a UN General Assembly resolution to establish the UN Commission on Monetary Transformation, Climate Change and Sustainable Development so that both the UNFCCC and the RIO Summit can profit of the Commission’s recommendations that could form the contents of Monetary Agenda for Climate and Development Action that could be included in the Summit’s Agenda 21 which would set the direction of the international community for several decades to come.

 

 

Feb
14

WallStreet's deadend and the TFD global governance system

Post By gaia1 in TFD system

 

WALL STREET’S DEAD END AND THE TFD GLOBAL GOVERNANCE SYSTEM

February 14, 2011

Felix Salmon, the finance blogger at Reuters, argues that Wall Street is heading towards a dead end. Since 1997, the peak year with its 7000 public companies, the listing has steadily gone down, so that presently only 4000 are listed. Those that are listed do not reflect the vibrancy in the economic sector where innovative companies such as Apple find their financing from private and, generally, large institutions. Thus, American style capitalism of shareholder companies that are part of a regulated financial system is disappearing.

One of the effects of this decline is the increased and unregulated power of large financial institutions and super rich elites who determine the direction of the various markets in the global economy. Their decisions do not foremost allocate capital based upon the need of the real economies of nations and regions, but upon their outsized desire of making money on their money by betting on those markets. Given the lack of an effective global regulatory structure, much of this “investing” is not monitored, let alone regulated. While nations battle with huge sovereign debts and have to resort to drastic budget cuts, huge global financial resources with its increasing financial concentration are directed towards non-productive users.

Should nations and civil society try to reform the present financial system and make public exchanges more effective in allocating capital for the real needs of people and planet? Should developing countries continue to set up their own stock exchanges or opt for an overhaul of the global financial system? How should the international community deal with a connected global economy that is so well described in Connected  by Daniel Altman who analyzed the global economy by watching it for 24 hours on June 15, 2005 and who,  several years later in Outrageous Fortunes , has been looking for the “deep factors” that would determine  its future?

The Tierra Solution gives an answer to those questions. Its TFD global governance system would utilize a carbon-based international monetary system to combat the climate crisis by advancing low carbon and climate-resilient development. It would monitor and regulate all the various sources of financing, be they stock exchanges, private funds, sovereign wealth funds, hedge funds etc., and thus create a level playing field in the financial and monetary sectors. By being able to monitor, regulate, and engage in credit and money creation its Global Central Bank would have the authority to direct the world’s existing capital and the new credit and liquidity requirements for climate and development policies, programs and projects towards  productive uses in the real economies of its member nations. Though this high level of collaboration of a global monetary union may seem unattainable in the next couple of years, the vision of and reason for such global governance system may be precipitated during this decade by an ever increasing awareness of the ineffectiveness of the present monetary and financial systems and the ascendancy of financial black markets and by the global serious impoverishments in food, health and housing of a looming climate catastrophe.

 

Feb
01

Interest rates and inflation in the TFD global governance system

Post By gaia1 in TFD system

INTEREST RATES AND INFLATION  IN THE TFD GLOBAL GOVERNANCE SYSTEM

 February 1, 2011

One of the two main functions of national or monetary authorities—the other is maintaining full employment-- is to devise policies that do not cause inflation or deflation. Getting the money supply right is an art of monetary statecraft by which inflation and deflation are avoided. One of the major ways of doing practicing this art is the use of the various types of interest rates monetary authorities can set. Two ways are generally used: the raising and lowering of the discount rate and indirectly influencing the direction of the federal funds rate. The first rate is the rate that banks are charged when borrowing from their central banks. High discount rates tend to slow lending and the economy, low ones make banks engage in more lending and speeding up the economy. The federal funds rate is the rate that banks charge each other for overnight loans. Raising that rate means bank have to hold more of their own reserves in their vaults and thus slows their lending. Low federal funds rates enable banks to make more loans.

 

The monetary and political union that is the bedrock of the Tierra Fee & Dividend global governance system also enables its Global Central Bank to institute a uniform global interest rate for the credit it circulates into the economy. There is no need for discount or federal funds rates because banks are not in the money creation anymore. Neither can they engage in fractional reserve banking of the funds of their depositors. They are utilities that handle governmental and private deposits and charge an administrative fee that is set as a global interest rate. The more efficient the bank operates, the greater its profitability.

 

There would also be no need for domestic monetary authorities to worry on how to set the proper discount and federal funds rates and to deal with “core inflation” versus “headline inflation” because inflation is monitored and its rate is set by the Global Central Bank. It would not be possible for the banking industry to influence the Bank’s Board of Governors as they were trying to do in 2011 when according to Paul Krugman’s New York Times column of January 31, 2011 they were advocating higher interest rates in the middle of a very weak economy, pointing to the so-called high prices of food, energy and other commodities, the components of the so-called “headline inflation”. The Global Central Bank would democratically set its “core inflation” rate excluding the “headline inflation” of fluctuating commodities, by instituting one global interest rate which, in essence, would be a uniform a uniform fee.