[P2P-F] discovering arnsperger's thought

Sun Jul 10 18:25:59 CEST 2011

> Bernard Lietaer and Christian Arnsperger on reinventing the financial
> system<http://feedproxy.google.com/%7Er/P2pFoundation/%7E3/1a9Vs-BHfZQ/09>
> ****
>
> Via<http://www.lietaer.com/2011/06/reinventing-the-financial-system-an-audio-interview-of-bernard-lietaer-by-dawna-jones/>
> :****
>
> *What is the structural cause of the financial crisis and what is its
> structural solution?*****
>
> *1. Watch the video* from monetary transformer *Bernard Lietaer*, from
> TedX Berlin:****
>
> <http://feedproxy.google.com/%7Er/P2pFoundation/%7E3/1a9Vs-BHfZQ/09>****
>
> *2. Listen to the audio podcast interview* here<http://www.lietaer.com/wp-content/uploads/2011/06/4d43a056-0d5c-c210-dd20-9882a119220f-1.mp3>
> .****
>
> *” Dawna Jones talks to Bernard Lietaer, author of “The Future of Money”
> and the forthcoming “New Currencies for a New World”, about the root causes
> of financial uncertainty and what practical steps businesses can take to
> insure against it.*
>
> *So just how can small and medium size business reclaim control over
> financial instability? At their heart, economic downturns and financial
> instability are symptoms of a financial and monetary system that is
> unsustainable. Yet nature shows us how to create a structurally stable
> monetary system and the same principles can help business survive the
> current turmoil.*****
>
> *In this special half hour interview, we’ll also how local innovations in
> currency serve to stabilize cash flow, local and regional economies.”*****
>
> *But how do we get from “here” to “there”, how can monetary transformation
> be implemented in the current world-system?*****
>
> Here<http://eco-transitions.blogspot.com/2011/06/what-transition-part-4-renewing_05.html>is the thinking of Christian
> *Arnsperger*:****
>
> *“So here’s the inconvenient truth: The monetary logic of capitalist debt
> which rules the day makes any collective transition project towards a
> pluri-economy based on a broadened equality-of-opportunity principle
> virtually impracticable. As it stands, our monetary system will get in the
> way of any “muddling through” process of gradual transition. This has
> nothing to do with any sort of conspiracy theory. Commercial private bankers
> aren’t any more “anti-transition” or reactionary than any other agent in the
> economy. In fact, on an individual and personal level, they may be all in
> favor of a transition. But the systemic logic which their activity
> reinforces de facto makes a transition difficult. That’s the reason why
> re-thinking the financial system is so crucial today for transition
> activists.*
>
> *Now, status-quo realists may counter that States should simply be forced
> to extinguish their debt altogether: pay back past public deficits, create
> no new ones. Wouldn’t that solve the problem? Not at all. In fact, another
> part of the inconvenient truth of this system of ours is that, if there were
> no longer any outstanding debts (public or private), there wouldn’t any
> longer be a single dollar or euro in circulation in the economy! (This was
> one of the main reasons why the Fed encouraged a boost of mortgage debt in
> 2007 and why many institutions went soft on supervision, because public and
> consumer debt was all but saturated already, meaning that liquidity had to
> be created through other debt mechanisms — one of them being household debt
> linked to real estate purchases. Many of the loans were sub-prime, but for a
> short time they sent credit multipliers rippling through the banking system.
> This created new money and the hope was that the whole economy would thus be
> jump-started and the bad loans paid back thanks to the rising housing bubble
> and a new surge in macroeconomic growth. The Fed’s gamble was lost, as we
> now know.) The dollar and the euro are privately created currencies emitted
> by the commercial banks, under the “control” of a central bank whose main
> roles are (a) to ensure that the banks will keep enough reserves so as to be
> able to face potential cash withdrawals and (b) to look out for “too high”
> inflation so that debtors (households, firms, and the State) don’t get away
> too easily with nominal rises in asset values — since inflation basically
> benefits debtors and the owners of real assets and hurts the owners of
> financial assets. In such a system, there is a constant pursuit of debt
> rollover (i.e., new debts being reissued as outstanding ones are being
> extinguished) and, therefore, a constant pressure for growth, if possible in
> real rather than nominal terms.*****
>
> *Although perhaps needlessly polemical, Nobel laureate Maurice Allais’s
> quip that the money creation mechanisms embedded in bank debt are akin to
> “counterfeit” does capture a crucial aspect of what’s going on. In her
> remarkable book The Web of Debt (Third Millennium, 2008), Ellen Hodgson
> Brown recounts the pronouncement of one U.S. judge who, on behalf of a house
> owner who had been dispossessed by his bank, ruled that the bank had in fact
> been guilty of counterfeiting because it had lent and created money (through
> a mere scriptural operation) for which no prior wealth existed, not even in
> the form of deposits (since banks routinely lend more than the deposits
> entrusted to them). Moreover, the principle of interest-bearing debt
> generates a strongly competitive, rather than cooperative, economy. Here is
> how Bernard Lietaer describes the process:*
>
> *“…interest is woven into our money fabric, and (…) it stimulates
> competition among the users of [the] currency. (…) When the bank creates
> money by providing you with your £100,000 mortgage loan, it creates only the
> principal when it credits your account. However, it expects you to bring
> back £200,000 over the next twenty years or so. If you don’t, you will lose
> your house. Your bank does not create the interest; it sends you into the
> world to battle against everyone else to bring back the second £100,000.
> Because all the other banks do exactly the same thing, the system requires
> that some participants go bankrupt in order to provide you with this
> £100,000. To put it simply, when you pay back interest on your loan, you are
> using up someone else’s principal. (…) In summary, the current monetary
> system obliges us to incur debt collectively, and to compete with others in
> the community, just to obtain the means to perform exchanges between us.”
> (Bernard Lietaer, The Future of Money, pp. 51-52, © Century, 2001)*
>
> *Basically, we’re living under a system where debt-money, as the only
> legally sanctioned means of exchange, is created and circulated by
> commercial private agencies (banks) under supervision of frequently
> semi-private agencies (central banks, many of which aren’t public
> institutions, despite what their names seem to indicate) so as to create an
> optimal “business climate” for investors in financial capital and for
> providers of capital-driven private and public employment. Money is not
> fully anarchic, we do have institutions that “manage” it and that steer the
> current monetary system (from national or regional central banks all the way
> up to the International Monetary Fund and the Bank for International
> Settlements), but these institutions are mainly designed to uphold and
> maintain industrial-financial capitalist social democracy — precisely the
> system which is getting dangerously close to unsustainability because of the
> persistent externalities and internalities it generates by its very logic.
> If we really want a transition towards a sustainable pluri-economy, with the
> help of all the framework conditions discussed in the previous installments,
> we need to address the alternatives that exist to this monolithic,
> private-monopoly money system.*
>
> *The basic idea is that means of payment should exist in proportion to
> expenses that we deem adequate — not just in order for miscellaneous private
> actors to reap maximum profits, but in order to reduce the multiple
> instances of crippling environmental and human stress produced by the
> economic system. Since the global de-growth compact (or economic Kyoto
> protocol) would require developed economies to become much more selective in
> the way they trade with each other, local currencies would quite likely
> become relevant again. As the spectrum of local economic activities becomes
> broader over time, locally earmarked means of payment would gain in stable
> and durable purchasing power, making it more and more rational for local
> economic agents to hold part of their money balances in local currency. One
> way this could occur, as Michael H. Shuman has suggested in his fine book
> Going Local (Routledge, 2000) [see his website in the sidebar], is for banks
> to have local branches that commit to dealing with local actors and not to
> siphon off the money of local depositors towards national or international
> investments. There are instances where this has worked, but usually it means
> some sort, and probably a substantial dose, of public intervention. Why
> would any private commercial banker in his right mind accept to forgo profit
> opportunities outside the local community? In other words, most local
> currencies are likely to be emitted either by the democratic community
> itself (as is the case in most Transition Towns — see Rob Hopkins’s blog in
> the sidebar) or by locally anchored non-profit financial institutions, which
> may either be private (as part of the Social and Solidarity Economy sector)
> or public.*
>
> *In all cases, however, such local currencies would have the same status
> as the local currencies of European countries prior to the euro had with
> respect to the dollar as a world currency: They would be complementary local
> currencies, coexisting with the euro and the dollar, not replacing them.
> This is, in fact, sensible because we saw that selective relocalization and
> reasonable de-globalization are not abrupt, revolutionary moves — they have
> to be compatible (via the crucial notion of subsidiarity) with a plurality
> of trade regimes, with most regions or municipalities developing both a
> stronger local economic fabric and lasting commercial links with other
> regions located as near to them as possible (or as far from them as
> necessary). As fossil fuels become more expensive, as climate change impels
> more and more countries to look for new options, and as local economies get
> revitalized as a result, increasing volumes of trade may stop being global
> and there might be a partial return — for bioregional reasons of
> sustainability rather than for opportunistic reasons of nationalism or
> dogmatic regionalism — to more restricted trade agreements. Bilateralism and
> its opaque power plays should, whenever possible, be avoided, but a “bull’s
> eye” logic in trade, where you get what you need as close by as you can get
> it rather than scanning the whole planet for the very cheapest bargain (even
> if it implies a negative return in terms of net energy), is likely to be a
> new reality. Still, none of this would imply a disappearance of world trade.
> There should certainly still be a world currency, though more and more
> numerous voices are calling for the U.S. dollar to stop assuming that
> perilous function. Lietaer’s and Douthwaite’s idea of an “ecology of
> currencies” doesn’t imply that there would only be local currencies. There
> should be, roughly speaking, as many currencies as there are legitimate
> trade areas: There is localized trade within a city, localized trade within
> a region, inter-regional trade within a broader but still circumscribed
> area, and international trade. In each of these cases, there are difficult
> technical issues as to how to actually delimit the optimally-sized trading
> area in an operational way. Whatever the case may be, there would be several
> complementary currencies, each performing a specific role in irrigating
> trade (and hence also production, work, investment, etc.) at the appropriate
> bioregional level. Each currency would need its own emission and regulation
> institutions, but there would be absolutely no reason why these should all
> conform to the current private-monopoly principle whereby commercial banks
> create money under the supervision of a (more or less private) bankers’
> bank, the central bank. In fact, as I explained above, there are good
> democratic as well as ecological arguments why such a monolithic logic
> should not prevail.*
>
> *Local “economic communes” could, eventually, use the local currency to
> collect local taxes, which would give all local economic actors an incentive
> for holding at least a minimal amount of that currency, hence for trading
> locally with the people who have some of it to spend. (I am indebted to
> Bernard Lietaer for this idea, which is linked to the so-called “Chartalist”
> school of monetary theory, represented a.o. by L. Randall Wray’s book
> Understanding Modern Money, Edward Elgar, 1998.) As a result, a fraction of
> the Economic Transition Income could end up being labeled in local currency,
> and thus spent on local goods and services, further contributing to a local
> revitalization. This would not imply that a citizen would lose his/her right
> to a full ETI if he/she moved to another place. The corresponding fraction
> of the ETI would simply be relabeled in the new local currency.*
>
> *But how would local complementary currencies be put into circulation? I
> emphasized in the previous post (installment #5) that capital should
> increasingly be seen as as a loan from the democratic community to its
> social entrepreneurs, who in turn will use it to produce and sell as locally
> as possible, to employ local labor whenever feasible, and so on. (To repeat
> once more, local citizens would also hold national and/or world currencies,
> and would perform trade accordingly at higher levels, too. Local currencies
> are to be complementary, not exclusive.) This in itself implies that the
> criteria for financing investments would have to be modified substantially,
> since as we saw, the current logic almost forces all innovators and
> investors to skim world markets in the hope of reaping sufficient wealth
> (labeled, if possible, in dollars or in euros) so as to honor their own
> interest-repayment obligations. One way to have the democratic community
> decide is to replace private by State monopoly. Let me say immediately that
> neither I nor Lietaer really believe in this option. But it has an audience
> within alternative circles. The idea would be to snatch money creation
> completely back out of the hands of the private banking sector — for
> instance, by imposing a 100% obligatory reserve rate or by making lending
> more than one’s deposits illegal. Money creation would become a State
> prerogative again, under tight democratic control (so that no one here is
> advocating a discretionary right for government to use the printing press
> whenever it feels like it). The quantity of money would be calculated so as
> to correspond closely to the needs of the real economy, not the needs of
> private banks for profit (nor the central-bank mediated needs of
> financial-asset owners for low inflation). Economic activities would be
> financed through public credit institutions, or the equivalent of public
> banks. There would still be interest payments — so that the growth
> imperative wouldn’t be completely eliminated — but they would accrue to the
> community rather than to the private banking sector. Rather than being the
> late counterpart of bank credits that were lent out while never even having
> been deposited, these interests would be sort of a tax that would allow to
> publicly finance a “social dividend” or social credit, an equivalent of the
> ETI. The State might therefore even be able to correspondingly lessen fiscal
> pressure on incomes, to the extent that both the ETI and transitioners’
> infrastructure investments could be financed through the social dividend.
> (For a discussion of social credit and basic income, see chapter 14 of
> Rowbotham’s Grip of Death.)*
>
> *If we don’t just want to replace a private monopoly by a public one, we
> need instead to think up bottom-up solutions so that money gets created more
> or less endogenously when it’s needed for specific types of transactions.
> One obvious solution is so-called mutual-credit currency, such as is being
> used in Local Exchange and Trading Systems (LETS) or in the Swiss inter-firm
> trading system known as the WiR (in German, Wirtschaftsring-Genossenschaft).
> There, without any intermediary and with a minimal amount of administrative
> coordination, non-interest-bearing credit lines are automatically opened and
> extinguished as individuals or firms engage pairwise in transactions. There
> are currently researchers and practitioners developing large-scale
> mutual-credit networks with elaborate compensation mechanisms so as to be
> able to broaden the scope of trade beyond small neighborhood or city
> communities (see http://communityforge.net/resources). Lietaer has thought
> up, and actually contributed to implement, other complementary currencies in
> municipalities or regions desiring to further specific environmental or
> social priorities. (See, for instance, his “C3″ or Circuito de Crédito
> Comercial scheme experimented in Uruguay, designed to boost employment when
> there is a dearth of mainstream currency in times of financial or banking
> crisis. Website: http://www.c3uruguay.com.uy/. See also Lietaer’s
> contribution to the WAT system in Japan, where a parallel currency is used
> to foster environmentally sustainable activities and ecological restoration
> by local NGOs. Website:
> http://www.lietaer.com/2010/05/the-wat-system-in-japan. See also:
> http://web.archive.org/web/20070302172021/http://home.debitel.net/user/RMittelstaedt/Money/watto-e.htm.)
> Another relatively decentralized and bottom-up way of creating non-banking
> currency would be to foster cooperative — private or public — financing
> networks within the Social and Solidarity Economy. (In Belgium, there is a
> Réseau de Financement Alternatif that studies and implements such solutions.
> The New Economics Foundation in the UK — see website in the sidebar — has
> also been very active in this area.) The idea here is that not-for-profit
> financial institutions would offer a service to the community and could
> charge much lower interest rates than the commercial banks who are being
> strangled by the disproportionate profitability demands of the investors who
> place their funds with capitalist financial institutions.*
>
> *If you think I haven’t really spelled out a very coherent picture here,
> you’re quite right. I haven’t. Research on parallel, complementary
> currencies is still in its infancy. After so many decades of private-bank
> monopoly on money creation, and after just as many decades of misleading
> most citizens into believing that money is created by the State, re-thinking
> money creation as a plural, decentralized, citizen-driven and democratically
> controlled activity is really difficult. We’re struggling to discover the
> right mixture of top-down and bottom-up for each instance of a currency.
> Much will depend on the transition-related objectives — better care for the
> fragile and elderly, more humane employment opportunities, greener
> production, more cooperatives, more “voice,” etc. — that we wish to assign
> to our various currencies. Lietaer and Douthwaite are both insisting on the
> fact that the more diverse our “ecology of money,” the more resilient will
> be the various subsystems of our sustainable pluri-economy. I agree with
> them. And this means that monetary reform is most probably — along with the
> global de-growth compact discussed in installment #1, with its fair and
> differentiated growth guidelines — the most urgent framework condition in
> favor of which transition activists should militate, even before we engage
> in any actual transition initiative, which under current conditions is
> likely to remain almost invisible and to miss its full potential. The first
> steps of the transition will be political, to be sure.”*****
>
> Please note that for Christian Arnsperger<http://eco-transitions.blogspot.com/2011/06/what-transition-part-4-renewing_05.html>,
> *monetary change can only take place in a wider framework, in which 6
> concurrent political and policy conditions are met:*****
>
> ** “De-growth” and an economic Kyoto protocol **
> * Fostering new governance through the creation of a World Transition
> Organization
> * Fostering new governance through participatory coordination and
> communalism
> * Introducing an Economic Transition Income
> * Deepening economic democracy and encouraging new forms of
> entrepreneurship
> * Re-thinking money creation and fostering a new “ecology of currencies”**
> ***
>
> *These six conditions seem to me to be components of a desirable and not
> unreasonable worldview. Still, to believe they could be introduced next
> Monday morning would be madness. Well, okay, it’s probably the case that to
> believe that anything at all could be changed next Monday morning (such as
> the kids starting to clean up their rooms by themselves) would be madness…
> But you know what I mean.*
>
> *What, given the horizon traced out by these six central framework
> conditions, might be things we could start changing soon? What are the
> actual next steps we might take, not in order to instantly implement these
> six conditions (as if they could be suddenly couched into a new economic and
> social constitution), but in order to create changes which, although perhaps
> still far removed from the ideal, might put the needle of our compass in the
> right position or, at the very least, might help us not to forget that these
> conditions are the ones we’re ultimately aiming for? Those are questions
> we now need to ask ourselves.”*****
>
>
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