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Feb
14

Grand Pursuit Anyone?

Post By gaia1 in Transformation versus reform

GRAND PURSUIT ANYONE?

Tuesday, February 14, 2012

In her recent book “Grand Pursuit. The Story of Economic Genius” Columbia university business and journalism professor Sylvia Nasar presents an important story of about half a dozen men (and one woman).  They asked the hard questions of their times and presented their answers or rather their vision that bound those answers together. It is such grand pursuit that is needed today where the monetary, financial, economic and commercial systems are not working.

How can the global privately-owned banking systems get working for the public good?

Presently, the European banks are flooded with cheap credit with little oversight how they going to use these cheap funds. Is it used to quickly buy unstable sovereign credit of the PIGS governments and making a quick buck while taking a great risk down the line when their economies are not strong enough to generate jobs and increase productivity? Or are they to invest in their home economies rather than the casino world of global finance?

Presently, the USA the Volcker Rule is being hotly debated and lobbied on by banks and their corporate legal helpers. They do not want to give up their betting with their proprietary funds and emphasize that they are not to be prevented from market making. Though it is difficult for the five regulatory agencies to stipulate the demarcation line, the overall tone seems to favor the banking industry, thus endangering the US economy. At the same time, the political stalemate also seems to favor the financial industry.

One thing that is becoming clear is that global cooperation has become a necessity. Both Europe and the USA need one another and so do the BRICS countries. The upcoming Rio 2012 Earth Summit should hammer out a global governance system of monetary, financial, economic and commercial norms and institutions that is characterized by this high level of needed global cooperation.

What is not clear how that global governance structure is to be guided, so that it is able to devise the grand pursuit of the 21st century as Engels and Marx, John Stuart Mill and Alfred Marshall did in the 19th century and Irving Fisher and John Maynard Keynes did in the 20th century. That global governance structure is to be embedded into a vision that is able to integrate the social, economic and environmental dimensions of sustainable development.

The International Institute for Monetary Transformation is proposing a solution that is “innovative” according to Maurice Strong and that is  “visionary and highly practical” according Hazel Henderson of www.ethicalmarkets.com It is not a reform proposal like the most recent monetary reform proposal by the Palais Royal Initiative. It proposes transforming the international monetary system by basing it on a carbon standard, i.e. a specific amount of tonnage of CO2e per person. By adopting such carbon-based international monetary system present day government, business and civil society leaders would combat this century’s greatest challenge, i.e. climate change which is wreaking great havoc on people, species and planet. Simultaneously, this carbon-based international monetary system would place humanity on the road to low carbon and climate-resilient development.

The guiding principle of this carbon-based international monetary system is monetary justice which is further explained in an international petition at http://www.change.org/petitions/g20-and-rio-summitteers-make-monetary-justice-the-basis-of-your-negotiations   that the reader is asked to consider  signing. For more detailed information, consult my forthcoming book “The Tierra Solution: Monetary Transformation, Climate Change and Sustainable Development.”

 

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

 

 

Feb
03

Comments on Regulation YY to the Federal Reserve Board

Post By gaia1 in American Monetary Matters

The following comment was submitted to the Federal Reserve Board in response to requests for comments on its Regulation YY.

 

Regulation YY - Enhanced Prudential Standards and Early Remediation Requirement for Covered Companies  [R-1438] is a first step for a banking system that is to be transformed as part of a global financial and monetary overhaul.

The International Institute for Monetary Transformation agrees with the editorial in the New York Times of February 3, 2012 which argues that the regulators are to demand higher reserve requirements. The Institute agrees with a substantial and increasing number of economists who believe that the banking system is to be based upon a 100% reserves requirement.

However, the US banking, financing and monetary systems cannot be considered in isolation. More than ever in human history these global systems are intimately integrated. Thus, the International Institute for Monetary Transformation agrees with a significant number of economists who believe that the international financial system is not to be based on debt and be conducted through the services of  privately-owned banking systems, but on credit or money that is created by the public sector. What is also needed is an international monetary system that is based upon a standard, not a pure or flexible gold standard, but a carbon standard expressed in a specific amount of tonnage of CO2e per person. This position is still held by only a small, but growing number of monetary, financial and economic observers who believe that no lasting financial and economic change is possible without basing the international monetary system on a standard which, in the face of this century’s greatest challenge of avoiding a climate catastrophe, could be based upon the decarbonization level of a society. The more a society uses renewable energy, the stronger its economy and its currency.

For this to happen monetary justice is to be taking as a guiding principle in economic and climate negotiations as expressed in the international petition on  http://www.change.org/petitions/g20-and-rio-summitteers-make-monetary-justice-the-basis-of-your-negotiations For more information see www.timun.net, the NGO Treaty on Global Monetary Transformation which is in preparation for the Rio 2012 Earth Summit and for  in-depth information on this proposed carbon-based international monetary system consult the Institute’s forthcoming book The Tierra Solution: Monetary Transformation, Climate Change and Sustainable Development.