CENTRAL BANKS, INFLATION, IMF, UN AND THE TIERRA PARADIGM

CENTRAL BANKS, INFLATION, IMF, UN AND THE TIERRA PARADIGM

29 June 2009

In present macroeconomics thinking central banks are to be independent. They are supposed to be beyond politics. They have to focus on avoiding inflation which is considered to be combated by all means.

There are several assumptions here that make this position untenable. The most egregious assumption is that monetary policies can be above politics. The second one is that inflation is the most important or sole policy objective of central banks. A third one is that monetary policy, related to the first assumption, is to be developed by the macro-economic discipline.

One of the main shortcomings of macroeconomics, according to Jonathan Kirshner, is its focus on aggregate statistics with the neglect of distributional ones. By focusing on the aggregate one is not forced to look at the politics of a monetary decision which always deals with the distribution of benefits and burdens across groups. Thus, setting monetary policy is as much a macroeconomic effort as it is a monetary diplomacy or a sociology of money effort.

Given that a central bank has to set monetary policies that benefit all groups and, in these times of climate emergency, the planet, it necessarily is to be part of the political process and is not to be separated from a messy democratic process. Consequently, a central bank is to be part of the public sector’s democratic process and not to be placed above or below it. The US Constitution, as a matter of fact, stipulates to that effect, though the 1913 Federal Reserve Act, by a very political (and unfair) process, officially placed it outside the public sector.

Why is it that central banks have such missionary zeal in pursuing the inflation objective? Because it is in the interest of the financial community and of privately owned banks that owe most financial assets. They do not want them to be devalued by inflation. Notwithstanding the 1913 stipulation that the Fed is run by an equal number of financial and non-financial governors, the financial community has held sway and thus inflation fighting continues as its most important objective. During this financial and economic crisis that was caused by that financial community the Fed is now pursuing other objectives, one of them, unfortunately, is giving priority to bailing out big international banks without transforming them and the international monetary, financial, economic systems.

What has the IMF to do with central banks? In this blog that is mostly focused on the international dimension of the monetary system the answer is: quite a lot. It is mainly guided by a macro-economic approach that is neo-liberalist in its approach. It was in May 1997 that a drastic revision in its Articles of Agreement was proposed to have its powers of balancing payments of states—poorly done given the endless excesses and surpluses in the balance of payments –was to be augmented by promoting the neo-liberal economic philosophy adhered to by Washington and other members of the G7. Thus, the IMF became the globalizer par excellence of that economic approach with its Structural Adjustment Policies and, of course, with the requirement that member states establish “independent” central banks. It is more than any other international institution together with its sister organization, the World Bank, that has made the present economic crisis a global crisis.

Within the context of this entrenched neo-liberal architecture that is promoted by the G8/20 in their conferences and summits is to be placed the efforts of United Nations which pursues the wellbeing of all peoples and groups and the wellbeing of the planet. Outstanding in this regard is the outcome document of recently concluded Conference On The Financial And Economic Crisis And Its Impact On Development and the opening and closing address of the president of the General Assembly, Father Miguel D'Escoto Brockmann, MM. The Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System or the Stiglitz commission made several important monetary proposals that became part of that outcome document.

The Tierra International Monetary Paradigm goes one step further in its monetary proposals as does the Stiglitz Commission. They constitute transformational change in the international monetary system. In its pursuit of the integration of the challenges of the economic and climate crises, the Tierra paradigm bases its monetary architecture on a reserve currency that is a carbon based. It would become part of the carbon account in a nation’s balance of payments. The development of the Tierra Monetary Paradigm is using an integrated approach of the disciplines of sustainability economics, the sociology of money, climate science and climate ethics. Its vision is based upon the Earth Charter, the 21^st century successor of the Universal Declaration of Human Rights of the 20^th century. Its historical challenge is seen in the context of the emerging sustainability revolution that is the successor of the earlier agricultural and industrial revolutions. 

The June 2009 UN Conference on the Economic and Financial Crisis and the Tierra Monetary Paradigm

 The three day conference that ended yesterday seems to have been a success. An outcome document was produced that was accepted by consensus and the General Assembly, the assembly of 192 nations or the G192, seem to have become the world’s central place to deal with the economic crisis and not the various traveling assemblies of the G8/20. Part of that success which may not have been fully realized by the majority of governmental and non-governmental participants was the vision that was presented by the General Assembly President Father Miguel D'Escoto Brockman. At the opening he presented the vision of the Earth Charter without going into details of how it came about, but emphasizing its integration of social and ecological values. At the closing he referred to Jesuit Teilhard de Jardin’s notions of the noosphere and evolution. Studying his two speeches more than the press conferences he conducted will give the reader better insight of the significance of this conference and the difference one person can make, particularly if placed at a high position.

In various ways the conference inspired me to struggle along with the development of the Tierra Monetary Paradigm notwithstanding the enormity of its challenges on my side, the listener’s side and on the side of organizations to start engaging in a monetary transformation. Many speakers, both governmental and non-governmental, spoke about the need for fundamental reform which is, basically, transformation. Outstanding in this regard was the President Rafael Correa Delgado of Ecuador, a former economics professor. His speech at the General Assembly and his presentation at the side event on Thursday were most inspiring and informing. Some also pointed to the need of including the climate crisis into the challenge. Both developments augur well for the Tierra Monetary Paradigm which I was able to present publicly in the four side-events that I attended, either as a comment or as a question. I almost got two dozen business cards of speakers and participants who are interested in this paradigmatic shift in monetary thinking as proposed in the Tierra Monetary Paradigm.

Today, the day after the conference, I have started a six part educational series to lift the veil of this arcane area of reserve and vehicle currencies, exchange rates, balance of payments, central banks and its relationship to the domestic and, especially, international financial and economic systems. Everyone is invited to visit the Discussion Forum on this website and be a ground floor participant in bringing about this transformational monetary system, which, given that the international monetary system is the glue than binds the international monetary, financial, economic systems together, is able to transform the way how humanity inhabits this Earth. It is an essential part of humanity’s third revolution--after the agricultural and industrial revolutions—which is the sustainability revolution guided by the Earth Charter’s vision of the common integrated social and ecological values for which thousands of organizations and millions of people on all continents and in all kind of formats have been engaged in for the last ten years.

Monetary blocs, IMF, US Dollar

MONETARY BLOCS, IMF AND THE US DOLLAR

26 June 2009

Having returned yesterday from a very fruitful day at the UN Conference on the World Financial and Economic Crises and its Impact on Development It is becoming clear that the present inefficient, unstable, inequitable and unstable monetary system is bursting at its seams. The Asian continent is working on its Chang Mai Initiative to have the Chinese Renminbi become a regional reserve and transaction currency. The same is being attempted by Russia with its ruble for its former Soviet republics. Even more strikingly and stridently Latin America is forging forward with a monetary architecture, consisting of the Bank of the South, own reserve currency and trading currency.  Africa seems to be lagging behind, though recently its finance ministers met to discuss prospects.

This new development in Latin America was eloquently presented by Ecuador’s President Rafael Correa Delgado, both in his address to the General Assembly and at a side event, called People’s Rights Not Corporate Profits: Close ICSID, Challenge Free Trade, and Build Just Economic Governance. Being a former economics professor he was able to challenge the autonomy of central banks, the WTO’s Financial Services Agreement and the World Bank’s International Center for the Settlement of International Disputes which is one step center to have TNC have their ways against governments.

These and other developments show that the IMF with its conditionalities that work for the international banking system, but not for developing countries’ wellbeing is loosing its standing as premier international monetary institution. As a matter of fact it has been failing for decades to stabilize the exchange rates for hard-currency countries by allowing the excessive imbalance in deficits and surpluses. Its days for uneven dealing with rich and poor countries seem to be over notwithstanding the strong support of the G8/20. I, for one, have decided that it cannot transform itself to be the new international monetary institution that could manage a carbon account in the nations’ balance of payments as proposed in the Tierra Solution.

The main consequence of all this for the US dollar is that the Obama Administration is to prepare itself for an orderly transition out of the dollar to SDRs and, hopefully, from SDRs to Tierras or a similar currency that is based upon carbon-emissions, so that the resolution of the climate crisis is built into the international monetary, financial, economic systems. The Administration should not let the dollar float on the open ocean without directing it with a steady hand at the helm. 

Is monetary transformation possible within 5 years?

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 international reserve currency at UN Conference

The following is the one page handout that spells out the latest thinking. For more information see IIMT  documents for the 4 page backgrounder.

THE TIERRA

A Proposal For A Carbon-Based International Reserve Currency As A

Major Component Of The UN Funding System For Development &

Climate Mitigation And Adaptation

Frans C. Verhagen, M.Div., M.I.A., Ph.D., President

International Institute of Monetary Transformation

www.timun.net; gaia1@rcn.com

WHAT IS THE TIERRA?

The Tierra is a carbon based international reserve currency that is based

upon the belief that monetary relations among nations must take into account

both financial and ecological indebtedness. It is an accounting unit that

measures ecological indebtedness as part of a nation’s carbon account that is

part of its balance of payments.

WHY SHOULD NATIONS ADOPT AN INTERNATIONAL RESERVE

CURRENCY BASED ON A CARBON STANDARD?

Nations states, which recognize their common but differentiated

responsibilities, will accept a carbon based reserve currency.

It would offer an equitable approach to dealing with the financial

indebtedness of countries from the global South. A carbon based reserve

currency would, at one and the same time, be a means for ecological debtor

countries in the North to settle their ecological debts with countries in the

South and for financial debtor countries in the South to settle their financial

debts with countries from the North. By allocating carbon emissions permits

(CEPs) to all adults and adolescents in the global North and South, it would

provide liquidity to all on an equitable basis. This would promote purchasing

power, especially to countries in the South which are hardest hit by the

present economic and climate crises.

At the same time the Tierra would be a contribution to combating climate

change. By transferring Tierras from ecological debtor countries (in the

North) to ecological creditor countries (in the South) as a means of

balancing carbon accounts, a carbon based currency would function as a

major institutional mechanism to combating climate change.

HOW DO YOU CREATE A CARBON-BASED INTERNATIONAL

RESERVE CURRENCY?

Unlike national or regional currencies that come into existence due the

governmental promotion and market acceptance, the Tierra would be

brought into existence by an international monetary decision-makinf process

that allocates CEPs to a nation’s Tierra Administrative Board based upon its

adult and adolescent population. In its search for a new international reserve

currency that is not nationally or regionally based the UN Conference on the

World Financial and Economic Crisis and its Impact on Development in

New York (6/09) and the Copenhagen Climate Change Treaty conference

(12/09) could establish a UN Monetary Board that would include the carbonbased

Tierra on an equal basis with non-emission based currency proposals.

The value of the Tierra would be based upon the carbon standard upon

which nations can peg their currencies. Its value would be determined by the

past, present and future carbon prices on European and Chicago Carbon

Exchanges. It would be set for several years so that it could become a stable

standard with fixed exchange rates. Thus, the carbon standard would

function like the classic gold standard which was used between the 1890s

and WW I. Like the maneuvered gold standard it would have a narrow band

within which currencies could fluctuate.

WAS THERE EVER A CARBON-BASED RESERVE CURRENCY?

In the late 1990s there was an emission-based currency unit-Ebcu-- the

originators of which even held an international conference in 2000 that

produced the FAESTA Noordwijk Aan Zee Draft Treaty. Like the Tierra, it

was based upon emissions. However, it was not conceived as a reserve

currency that would be part of a nation’s carbon account in its balance of

payments. Both the Tierra and Ebcu are the only emission-based currency

proposals amidst a dozen other currency proposals that are based on a basket

of currencies, the consumer price index or other monetary or economic

arrangements.

HOW DOES THE TIERRA COMPARE WITH THE SDR?

Unlike the SDR, the Tierra offers a transformational approach to solving

ecological and financial indebtedness--using carbon accounts in the balance

of payments as an institutional means to fund development and climate

mitigation and adaptation.

New York City, 17 June, 2009

From Monetary Empire to Monetary Democracy

 Balancing the ecological and financial accounts in the balance of payments.

Presently the US dollar, the euro and the yen are the major reserve currencies. There are more disadvantages than advantages for both the reserve currency issuing countries and countries that are forced to use these currencies for their international trade and other transactions. The situation will not become better by having China and Russia trying to have their currencies accepted as regional reserve currencies.

The UN GA President's Commission on Monetary and Financial Crises has proposed a non-national reserve currency which would be in the long-term interest of the countries involved. It would significantly improve the equity and sustainability, and, therefore, the stability of the international monetary system.

However, the G8 want to maintain the status quo of its monetary dominance that can be rightly called a monetary empire. Though some IMF reforms were advocated by the G8/20 Summit on April 2, the monetary empire with its neo-liberal economics philosophy remains intact.

Transitioning to an international monetary democracy is necessary and the UN approach is a very important first step. However, the G8, under the leadership of the USA, still refuses to take this first step. Though the 4 BRIC countries are in favor of this “supra-sovereign currency” they will have to garner more support of other nations in the global South and of the global community to make this first step possible.

However, a second step is to be taken. It would be a transformational step in a carbon-constrained world that would challenge the international democratic process for a global monetary governance structure and process. According to the International Institute of Monetary Transformation the new reserve currency is to be based upon a carbon standard. Given all nations’ common but differentiated responsibilities towards mitigation of and adaptation to the climate crisis, the global community of governments, business and civil society are to engage in developing such carbon-based international reserve currency. It would be part of a nation’s carbon account in its balance of payments. After receiving their equal allocation of carbon emissions permits based upon the number of adults in their populations, nations in the global North who are ecological debtors settle their carbon accounts by transferring their ecological IOUs to nations in the South who are ecological creditors. Various documents at www.timun.net explain such carbon-based currency which is called the Tierra. Its Tierra Monetary Solution is particularly directed towards the financing for development and climate mitigation and adaptation measures. A book is in preparation entitled THE TIERRA SOLUTION: A Monetary Approach for Dealing with Ecological and Financial Indebtedness in the Global North and South.

New Foundation philosophy to be applied to monetary matters

Obama’s NEW FOUNDATION philosophy to be applied to domestic and international monetary matters

 (Submitted to Open Government Dialogue on June 4)

The Obama Administration has been promoting the phrase of  New Foundation as a summary of  its governance approach in both domestic and international policies. Having just listened to his Cairo speech to the Muslim and Arab world I sensed that he was engaged in developing the principles or foundation for  clear, principled, transparent policies in that part of the world.

I would like the Obama Administration to do the same for the domestic and international monetary systems that are the glue of financial and monetary systems.

The first step is to promote a national debate on this monetary part of the financial and economic crisis that America has inflicted on the world.

I suggest that at least three elements of that discussion are money creation, complementary currencies and a non-national international reserve currency.

It is encouraging that Ellen Brown’s idea of removing the money creation function away from privately owned banks to the public sector has received such strong response: among the 700 responses only about one hundred were negative. My comment is that we have to take this one step further and consider the whole US and international monetary system.

Complimentary currencies as proposed in the idea of natural money have a strong track record in monetary history. If FDR had allowed them to work in full bloom the Great Depression could be been shortened by many years.

As argued in my first submitted idea in this Open Government Dialogue about a carbon-based international reserve currency, a non-national international reserve currency is needed for international stability in monetary, financial, economic systems. This is a strong recommendation by the UN GA President's Commission on Monetary and Financial Crises which will be part of the UN Conference on Development and Finance on 24-24 June. I have been submitting to them the proposed Tierra international reserve currency in order to base that new reserve currency on the price of avoided carbon emissions. Adopting this carbon reduction would help all nations to deal with the financing of development and climate mitigation and adaptation measures. If the Obama Administration  and China, the two greatest carbon producers, would work together by finding their common monetary ground, the international monetary system would be transformed.

Why is this idea important?

The Obama Administration’s New Foundation philosophy is  important domestically and internationally. It would clarify the principles upon which nations singly and communally would pursue social and ecological peace at home and abroad.. Such philosophy has to be extended to the domestic and international monetary systems which have drastically failed both people and planet.

Tierra Proposal Submitted to Open Government Dialogue

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.

Settling ecological and financial indebtedness between nations

In their 2008 book Unjust Deserts. How the Rich are Taking Our Common Inheritance and Why We Should Take it Back  Gar Alperovitz  and Lew Daly argue that people like Bill Gates and other billionaires cannot claim that their fortunes belong to them because they have earned it. They have used the technological, financial, political, cultural, economic resources of their societies and build their inventions or services on them. Thus, they argue, society can lay claim to a very large part of their fortunes. Citing various researchers they present a percentage of about 75% and up depending upon the fields of their contributions. Thus,  their “just deserts” or “that which is deserved” on account of their contribution may be in the area of 25%.

In response to my question about the international implications of  the Just Deserts argument to the two authors during their book presentation at the Demos organization in early 2009 they responded that this was an important question to which they had not (yet) given attention.

What are the Just Deserts of nations in the global North in respect to their industrial achievements? Do they own their infrastructure 100%? What and whose resources did they use in building it? Who made possible  the use of the common resources of air, water, soil, minerals in building their infrastructures? They were there for the taking and so, in respect to the use of the atmosphere, the atmosphere was occupied by the industrializing nations.

Does the rest of humankind outside the industrialized nations or outside the G8 own part of their infrastructure, based upon the claim that it was their atmosphere, water too?

Though international resources law seems to be a very limited area of law and mostly written by those who control those resources, it is time that the principle of “Just Deserts” is applied to the settlement of  ecological and financial indebtedness between nations in the global North and South. It is to be recognized by the  industrialized nations that at least one third of their infrastructure is owned by the rest of humankind. Acknowledging this principle may make it easier for them to transfer resources for the funding of development and climate mitigation and adaptation measures. Much more work has to be done in calculating the percentage of ‘Just Deserts’ and incorporating results in international law.

Of course, the International Institute of Monetary Transformation would like to see that this flow of the various types of  resources—loans, grants, nature swaps, offsets, outcomes of various carbon reduction methodologies—include the institutional mechanism of a carbon-based international reserve currency, called the Tierra, that is part of a carbon account in a modified balance of payments administered under UN auspices. This Tierra arrangement unlike the SDR arrangement would demonstrate an equitable, democratic and sustainable approach to compensating for the atmospheric occupation that the fossil fuel use of the G8 forced upon the commons of humanity.