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Mar
03

Bitcoin and future of local and global monetary arrangements

Post By gaia1 in Tierra Currency

This post compares Bitcoin and other local and global monetary arrangements with the Tierra system. We will see whether the NY Times isgoing to publish it. In any event, it will be used as a circular at the Nexus conference in Chapel Hill, both for a post session and also for my workshop on the TFD on Friday March 7. Details are listed at the events page.

BITCOIN AND FUTURE MONETARY ARRANGEMENTS

Op-Ed piece submitted to the NY Times  on 3/2/14

Bitcoin, Bitcoin variations, complimentary or local currencies, electronic information based currencies,  public state banks and other alternative payment and investment systems on the local and global level are evidence of the fact that the present privately owned banking systems and its associated international monetary system is not working effectively for many classes of people and institutions. This is a matter of great social, economic and environmental concern because the international monetary system, binding together as glue the monetary, financial, economic and commercial systems, can be considered to be foundation of a world order that enriches the few, impoverishes the many and imperils people, species and planet.

One of the beneficial effects of the emergence of Bitcoin and its recent major setback with the bankruptcy of Mt. Gox,  its major exchange, is the discussion of what money is, how it is created and controlled and, in the opinion of Robert Shiller of Yale University in his Times article of March 1,  how money should be measured as a unit of account. Such discussion can only lead to national and international monetary arrangements that will be more just, sustainable, and, therefore, more stable than the present ones.

As the inventor of the Tierra carbon-based international monetary system, a bold effort to show a pathway to resolving the looming climate catastrophe through monetary transformation, I have compared Bitcoin and similar virtual currencies in terms of their social, economic and ecological terms with other emerging monetary arrangements, be they virtual or not.

I consider the Bitcoin phenomenon to be at the bottom rung of new money arrangements, most of which are local or national efforts because the international monetary system with all its neo-classical shortcomings is still solidly entrenched. As recently argued by columnist Nocera, Bitcoin is basically a commodity rather than a currency in its meaning as a means of exchange or store of value. Because its supporters and investors want to escape financial institutions that are (slightly) regulated, Bitcoin has no regulatory structure to protect its investors. Thus, as a store of value, Bitcoin is on shaky grounds which is evidenced in the strong fluctuations on its exchanges. In terms of its economic and ecological impacts, Bitcoin is a lightweight currency. Being more of commodity rather than a currency it is a platform for speculation or, worse, as a conduit of drugs and other non-legal uses. Its economic and ecological benefit will be very little because of its miniscule investments in business operating on a triple bottom line.

On the other hand, local or complimentary currencies of which there are hundreds now since Robert Owen started the first one at the end of the 19th century contribute to the triple bottom line approach of local businesses. They make the provisioning of more goods and services possible, particularly in times of recessions. This is well described in the 2011 publication Creating Wealth, Growing Local Economies with Local Currencies written by sustainable communities planner Hallsmith and a well-known monetary system specialist Lietaer.

One step up from local currencies is the reemergence of state public banks where local governments place their tax receipts and other revenues in a state-owned bank. These banks are able to direct their investments to social, economic and environmental needs of the community without the need to borrow from the privately owned banking systems. The Bank of North Dakota has been successfully been investing since the 1930s, often working with the local privately owned banks. Presently, over a dozen legislatures in the USA are considering starting such state banks. Vermonters for a New Economy are in the forefront of this effort and obviously they are faced  with strong opposition of big banks, using heavy lobbying and spreading misinformation. Similar confrontations will become normal in other states in this transitional period to green economic and monetary systems.

On top of this pyramid of new monetary arrangements is located the global Tierra monetary system which would constitute an international monetary union. It is either floating exchange rates or monetary unification that Barry Eichengreen’s 1994 book proposes as possible future monetary arrangements. The Tierra monetary union (TIMU) as indicated on its website www.timun.net  is based on its carbon standard of CO2e per person. This monetary standard is not to be confused with the loyalty local carbon currency. The former is the standard on which national currencies or the new  single global currency of the Tierra are pegged, while the latter, together with other environmentally-based local currencies, is not a standard but a loyalty program where customers can pay 10-20% of their bills with these carbon currency units (CCU). The Tierra is also not to be confused with a voluntary carbon standard, which individuals or businesses use as part of their pursuit to living lightly on the planet. The Tierra monetary standard leads to fixed exchange rates that fluctuate within a small band. It also leads to balance of payments system that keeps track not only of financial but also ecological (climate) debts and credits. The Standard also leads to the need for a global central bank, which would be governed by the representatives of the regional monetary unions such as exist in Europe, USA, West and East Africa, Asia. My 2012 book The Tierra Solution: Resolving the climate crisis through monetary transformation presents in detail the conceptual, institutional, ethical and strategic dimensions of this bold monetary plan for the future.

Future monetary arrangements on the local, state, regional and global levels will be very much determined by an informed and politically savvy citizenry. They will ask the hard questions about progress, wealth, money and demand an explicit normative framework of principles that would guide the search for answers. The development of principles is particularly important in 2014 when humanity is preparing for the post-2015 development agenda in which principles, unfortunately, do not yet precede methods or, in UN parlance, GTIs(Goals, Targets, Indicators).

“As to methods there may be a million and then some, but principles are few. The man who grasps  principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”

Ralph Waldo Emerson, 19th century American philosopher.

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Frans C Verhagen, M.Div., M.I.A., Ph.D. is a sustainability sociologist with training and experience in divinity and international affairs, particularly green monetary economics. He founded the International Institute for Monetary Transformation in 2009 which is engaged in research, education and advocacy in alternative global monetary systems.