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Remove the global reserve system!

Post By gaia1 in TFD system


Wednesday, November 03, 2010

Removing the global reserve system would not only bring into balance the international monetary system and substantially reduce financial imbalances, but would create the opportunity for the global financial, economic and commercial systems to flourish. Removing the global reserve system and basing the presently malfunctioning international monetary system  on a monetary standard would make national currencies convertible and, if nations so decide, would create a seamless opportunity to introduce a world currency that is based upon that standard. A thusly rebalanced international monetary system would create the opportunity to design a financial system where a global monetary authority is able to monitor and regulate financial flows and steer investments into the real economy. Shadow banking which most often is casino banking would be an institution of the past. Once the financial sector is rebalanced by banking systems where only the public sector creates money both the global economy and international trade are in the position to develop within clearly defined, ecologically determined boundaries.


Removing the global reserve system is not a reformist policy. It is a transformational policy that overhauls the international monetary system that will have its ripple effects in the other global systems. It should have happened at the four past G20 Summits and should be seriously considered this month at Seoul Summit and, surely, at the 2011 Summit in Paris where president Sarkozy has asked for fundamental monetary reform.


The need for this transformational monetary policy is demonstrated by the main economic developments of the last couple of decades when the center of economic gravity has been shifting from West to East and particularly from the USA to China. Stephen Green, the chairman of HSBC and an ordained priest in the Church of England since 1988, compares in his 2010  Good Value the global political constellation with a rectangle where one side presents the workshop nations, another  the resource nations, a third the finance nations and a fourth the consumer nations. He shows how this economic constellation is shifting to the East, particularly China.


It is reported in the New York Times of November 2, 2010 that China is investing billions of dollars from its $2.3 Sovereign Wealth Fund in the economically weak nations of the EU. One of its major conditions for support is that they do not exert pressure on having China appreciate its currency. In other words, it is profiting from the malfunctioning international monetary system by insisting that the global reserve system of which it is a or perhaps the main beneficiary be kept in place. Of course, advocating as it does that the US dollar as reserve currency be replaced by a non-national reserve currency would keep the global reserve system in place, though in reformed version.


It is also to be noted that China engages in “creative accounting” according to Ellen Brown by investing in local banks made possible by its majority ownership in the Chinese banking system. Its decision not to privatize its banking system and follow the accounting rules of the West makes its monetary, financial, economic and commercial positions so much stronger.  Why should Western governments be beholden to privately-owned banking systems? In a transformed international monetary system scenario governments would become the sole source in money creation within the parameters set by the global monetary authority, the political arm of the international monetary union. The latter union would emerge out of the various regional monetary unions that are presently increasing in quantity and quality.


The global reserve system can be replaced by a monetary standard which can be based upon anything that nations agree upon. The International Institute for Monetary Transformation has proposed to base it on a specific amount of tonnes of CO2e per person, so that the international monetary system is used to combat climate change through advancing low carbon and climate-resilient development. Its proposal of the Tierra Fee & Dividend was first presented at the Yale/UNITAR conference on Global Environmental Governance (September 17-9, 2010) and is available at and in great detail at its website


Charles Ferguson rendered a real public service through his film The Inside Job, which illuminates the world’s greatest financial fiasco. Though his website presents additional information for reflection and action, it is necessary to have his mostly domestic focus directed towards the malfunctioning international monetary system with its global reserve system, so that real monetary, financial, economic and commercial transformation can take place which would prevent such financial disasters in the future.