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<h3 style="line-height: 10.2pt;"><a name="13114dd0f9da3703_131141ed4eb7fc63_30834_4"></a><span style="font-size: 10pt;"><a href="http://feedproxy.google.com/%7Er/P2pFoundation/%7E3/1a9Vs-BHfZQ/09" target="_blank">Bernard
Lietaer and Christian Arnsperger on reinventing the financial system</a><u></u><u></u></span></h3>
<p style="line-height: 10.2pt;"><a href="http://www.lietaer.com/2011/06/reinventing-the-financial-system-an-audio-interview-of-bernard-lietaer-by-dawna-jones/" target="_blank">Via</a>:<u></u><u></u></p>
<p style="line-height: 10.2pt;"><b><span>What
is the structural cause of the financial crisis and what is its structural
solution?</span></b><u></u><u></u></p>
<p style="line-height: 10.2pt;"><b><span>1.
Watch the video</span></b> from monetary transformer <b><span>Bernard Lietaer</span></b>,
from TedX Berlin:<u></u><u></u></p>
<p style="line-height: 10.2pt;"><a href="http://feedproxy.google.com/%7Er/P2pFoundation/%7E3/1a9Vs-BHfZQ/09" target="_blank"><img src="" border="0"></a><u></u><u></u></p>
<p style="line-height: 10.2pt;"><b><span>2.
Listen to the audio podcast interview</span></b> <a href="http://www.lietaer.com/wp-content/uploads/2011/06/4d43a056-0d5c-c210-dd20-9882a119220f-1.mp3" target="_blank">here</a>.<u></u><u></u></p>
<p style="line-height: 10.2pt;"><i><span>”
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.<u></u><u></u></span></i></p>
<p style="line-height: 10.2pt;"><i>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.</i><u></u><u></u></p>
<p style="line-height: 10.2pt;"><i>In this special half hour interview, we’ll
also how local innovations in currency serve to stabilize cash flow, local
and regional economies.”</i><u></u><u></u></p>
<p style="line-height: 10.2pt;"><b><span>But
how do we get from “here” to “there”, how can monetary transformation be
implemented in the current world-system?</span></b><u></u><u></u></p>
<p style="line-height: 10.2pt;"><a href="http://eco-transitions.blogspot.com/2011/06/what-transition-part-4-renewing_05.html" target="_blank">Here</a>
is the thinking of Christian <b><span>Arnsperger</span></b>:<u></u><u></u></p>
<p style="line-height: 10.2pt;"><i><span>“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.<u></u><u></u></span></i></p>
<p style="line-height: 10.2pt;"><i>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.</i><u></u><u></u></p>
<p style="line-height: 10.2pt;"><i>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:<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>“…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.” <br>
(Bernard Lietaer, The Future of Money, pp. 51-52, © Century, 2001)<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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.<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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.<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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.<u></u><u></u></i></p>
</div></div><p style="line-height: 10.2pt;"><i>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.<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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.)<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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
<a href="http://communityforge.net/resources" target="_blank">http://communityforge.net/resources</a>). 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: <a href="http://www.c3uruguay.com.uy/" target="_blank">http://www.c3uruguay.com.uy/</a>.
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:
<a href="http://www.lietaer.com/2010/05/the-wat-system-in-japan" target="_blank">http://www.lietaer.com/2010/05/the-wat-system-in-japan</a>. See also:
<a href="http://web.archive.org/web/20070302172021/http://home.debitel.net/user/RMittelstaedt/Money/watto-e.htm" target="_blank">http://web.archive.org/web/20070302172021/http://home.debitel.net/user/RMittelstaedt/Money/watto-e.htm</a>.)
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.<u></u><u></u></i></p>
<p style="line-height: 10.2pt;"><i>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.”</i><u></u><u></u></p>
<p style="line-height: 10.2pt;">Please note that <a href="http://eco-transitions.blogspot.com/2011/06/what-transition-part-4-renewing_05.html" target="_blank">for
Christian Arnsperger</a>, <b><span>monetary
change can only take place in a wider framework, in which 6 concurrent
political and policy conditions are met:</span></b><u></u><u></u></p>
<p style="line-height: 10.2pt;"><b><span>*
“De-growth” and an economic Kyoto protocol </span></b><b><br>
<b><span>* Fostering new
governance through the creation of a World Transition Organization </span></b><br>
<b><span>* Fostering new
governance through participatory coordination and communalism </span></b><br>
<b><span>* Introducing
an Economic Transition Income </span></b><br>
<b><span>* Deepening
economic democracy and encouraging new forms of entrepreneurship </span></b><br>
<b><span>* Re-thinking
money creation and fostering a new “ecology of currencies”</span></b></b><u></u><u></u></p>
<p style="line-height: 10.2pt;"><i><span>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.<u></u><u></u></span></i></p>
<p style="line-height: 10.2pt;"><i>What, <b><span>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?</span></b> Those are questions we now need
to ask ourselves.”</i><u></u><u></u></p><br></td></tr></tbody></table></div></div></div></blockquote></div></div><br><br>