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the monetary dimenison of the sustainable communities development model

Post By gaia1 in Economic crisis


Saturday, April 28, 2012

Note that rather than using the terminology of sustainable development the terminology of sustainable communities development (SCD) is used here. The latter terminology is preferred to make the point that the SCD model points to the need of development of sustainable communities both in the global North and South while sustainable development (SD) model is mostly geared to SD in the global South as if the global North does not need development and as if the global North and South are not interconnected.

One of the four main elements of sustainable communities according to the Institute of Sustainable Communities in Montpelier, Vermont, USA is economic security. The others being ecological integrity, empowerment and responsibility, and social wellbeing.

Two of the five subcategories in this economic security category are listed as “a diverse and financially viable economic base” and “reinvestment of resources in local economy”. Both these conditions for a sustainable community, be it a city in the North or a village in the South, can be applied to a diverse monetary base, where local, national and global money intertwine.

In Local Money. How to Make it Happen in Your Community Peter North, a geographer and member of the Transition movement, presents in very understandable prose the various expressions of local money: Local Exchange Trade Schemes (LETS), Time Banking, Ithaca Hours, Creditos, Deli Dollars, Berksharess, Totness Pounds, Credit Unions, Community Banks, Local Bonds. One can add to these monetary modalities the contributions of the microcredit movement, particularly those that are not made by commercial institutions that entered the field after Yunus’ original drive.

Local money, particularly the money modality that is owned and managed locally, is able to empower local people to start small businesses which would produce for the local economy. Such economic activity keeps both the monetary and economic resources within the community, strengthening it. A beautiful example is the Self Help Groups in South Africa as described in and viewed at The example also shows how the presence of a locally owned monetary base contributes to the strengthening of many other good characteristics of a sustainable community.

While most local money modalities are complimentary to the national currency, it is also possible to have national currencies be owned by the public when the state establishes its own bank by pooling its financial resources in such bank rather than depositing them in privately-owned banking systems. This was done, particularly in the 1930s by the Social Credit parties in Canada and New Zealand and by the state of North Dakota in the USA, and which is now being considered in 14 states in the USA according to

Unfortunately, global money and its international monetary system are in its infancy. There is no Global Central Bank that could administer a system that not only regulates capital flows, but also be the sole creator of new money and credit. In order for that to happen nations, business and civil society have to come to the realization that without monetary unification the present monetary, financial, economic and commercial systems can not function properly in this highly interconnected world that continues to globalize.

Such awareness could grow if, at the same time, governments, business and civil society would be willing to take serious steps to deal with the climate crisis. In that case they could consider taking a specific tonnage of CO2e per person as a standard for a 21st century international monetary system.

If such carbon-based international monetary system were to come in place where not scarcity and austerity were the norm, but plenitude and monetary freedom, many of the other local and national monetary modalities would change dramatically and the world would be place where humans would change social systems in order to adjust to immutable physical systems.

It is in the interconnected world of ours that local, national monetary modalities are to be considered in a global monetary modality that opens up the wellspring of creativity for the wellbeing of people, species and planet. It is this global modality that has been presented in detail in The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation which will be published in early May.




Europe's suicide in a global perspective

Post By gaia1 in European Union


Monday, April 16, 2012

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.



No Turning the Corner, unless....

Post By gaia1 in TFD system


Monday, April 16, 2012

“Out of the sighs of one generation are kneaded the hopes of the next.”Joaquim Maria Machado de Assis, Brazilian novelist, poet, and playwright (1839 – 1908)

There is a dense fog of economic and ecological gloom hanging over the globe. This is not a fog shown on a satellite picture, but a human-made fog. It is a fog of dysfunctional monetary, financial, economic and commercial systems that keep the world constrained from reaching decent quality of life for its 7 billion human beings and its trillions of other living beings. This economic fog will even get denser because of the ever increasing ecological fog of global warming, measuring in parts of million of CO2e in the atmosphere, and its ever increasing social consequences of social disruption. Can this fog be lifted or at least its density reduced?

IMF’s Christine Lagarde noted in her address to the Associated Press on April 12 that given the economic situation in Europe and in the USA “markets remain volatile and that turning the corner is never easy.”  One thing is clear to her: “... integration poses great risks, but it also promises great rewards. Heightened global cooperation is the key. History has shown us that when nations face common challenges in a spirit of solidarity, everybody wins. When nations pull apart in acrimony, going their own way and seeking their own advantage, everybody loses.” How can nations cooperate in lifting the fog of economic and ecological gloom (and doom in no proper action is taken) and turn the corner for functional monetary, financial, economic and commercial systems to emerge?


First of all, such emergence is made possible by achieving an ever better understanding of the dynamic interplay between these global systems and the systems of inequality. Thus, Galbraith in his new book “Inequality and Instability” argues that finance is the driveshaft that links inequality to economic instability. Like its closely related reality of the equity they both very much determine how well these global systems will work.


Second of all, these functional systems will emerge when the crucial role of the international monetary system as glue of these systems is recognized. While monetary historian Barry Eichengreen emphasizes the glue metaphor, other metaphors such as lubricant and linchpin are equally useful in emphasizing the basic role of the international monetary system. Reforming and especially transforming the global monetary system means reforming or transforming the other systems. A proposal for a transformed international monetary system will be presented below.


Thirdly, a guiding principle for a global governance framework is needed that would be able to make the social, economic and ecological dimensions of sustaining futures a reality. This pursuit is one of the main challenges of the upcoming Rio June 2012 Earth Summit.


Fourthly, in order to facilitate the above three requirements nations and their private sectors and civil societies are to work far harder in discussing and developing a new set of integrated social and ecological values, the kind of common value base that is part of the Earth Charter which was launched in 2000 after five years of intensive, worldwide consultation of thousands of groups.


Based upon a similar framework as the Earth Charter’s the Verhagen publication of The Tierra Solution: Resolving the Climate Crisis through Monetary Transformation proposes a pathway that would satisfy those other three requirements and could turn the corner once and for all if being pursued and implemented. It is based upon the carbon monetary standard of a specific tonnage of CO2e per person. Its unit of account of the Tierra would be indicate the quantity of the fixed exchange rates which would make them convertible until the time nations decide to adopt the Tierra as a global currency. Nations that decarbonize the most will have the strongest economies and, consequently, the strongest currencies. Nations would settle their financial and ecological (climate) debts and credits via a modified balance of payments mechanism where a sizable amount of financial credits of nations in the global North can be bilaterally settled with the ecological credits of nations in the global South. Most importantly, this carbon-based monetary architecture is governed by the Tierra Global Central Bank which, unlike the IMF, would be an integral part of the United Nations and which, unlike the Fund, would be a real bank. It would the sole creator of money because the present privately-owned banking systems would be based upon 100% reserve requirements, i.e. they would not create money, but function as utilities.


Gone are the days when the financial systems were based upon debt rather than money or credit. Gone are the days when austerity was needed to balance budgets and reduce debts. Days have come when financing will be ample for the billions of valuable programs that are needed for equitable and sustainable futures for all.


No turning the corner in this present fog of economic, ecological and social gloom and doom is possible, unless….nations start to cooperate in devising new monetary, financial, economic and commercial systems based upon a transformed international monetary system to combat the climate crisis and advance low carbon and climate-resilient development in the global North and South.


“If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”  Henry David Thoreau, 19th century American transcendentalist.