Bernard Lietaer

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Monetary Diversity Why and How? Bernard LIETAER [email protected]

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Bernard Lietaer, key-note speaker at the Leaders for Nature Forum 2014. Lietaer is the author of The Future of Money.

Transcript of Bernard Lietaer

Page 1: Bernard Lietaer

Monetary Diversity Why and How?

Bernard LIETAER

[email protected]

Page 2: Bernard Lietaer

www.leadersfornature.com @Leaders4Nature

Four Simple Questions

• Who creates our money?

The Government?

The Central Bank?

Someone else?

• How is money created?

By the Printing Press?

By Debts with the Banks?

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Four Simple Questions

• How is the money monopoly enforced?

By law?

By taxes?

• What is money?

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Defining Money

• All economic textbooks define money by

what it does, not by what it is !

• Standard of measurement

• Medium of exchange

• Store of value

• Money is an agreement within a

community to use something standardized

as medium of exchange

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Plan

• Why is our money not neutral?

• Solution: complementary currencies?

• Some Examples

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5 Reasons The Monetary System Is Not Neutral

1. Amplification of boom and bust cycles: ‘when it

rains, it pours’

2. Short-term thinking: ‘Discounting the future’

3. Compulsory growth: ‘tyranny of compound interest’

4. Concentration of wealth: ‘Poor versus super rich’

5. Devaluation of social capital: ‘Competitive Behavior overpowers Cooperation’

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Symptoms of Systemic Monetary Instability ?

Since 1970, IMF identified: ◦ 145 banking crashes

◦ 204 monetary collapses

◦ 76 sovereign debt crises

◦ 425 countries in systemic crises!

Such crises are a remarkably “hardy perennial” (Kindleberger)

◦ 48 well documented major meltdowns between 1637 and 1929.

• My claim: modern money is structurally unstable

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Sustainability of Complex Flow

Networks

• Natural ecosystems have in common to be sustainable. What else do they have in common?

• Sustainability of complex network requires appropriate balance between Efficiency and Resilience, emergent properties from 2 structural variables of complex networks: diversity and interconnectivity

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High Diversity

High Interconnectivity

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www.egs.mmu.ac.uk

Low Diversity (Monoculture)

Low Interconnectivity

My.Opera.com

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Complex Networks

• Diversity and interconnectivity are 2

structural variables => applies to all networks

with similar structure, including money system!

• Structural variables are independent from what

is being processed in network

biomass in an ecosystem,

electrons in electrical circuit,

information in immune system,

money in an economy…

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Resilience

Efficiency

Balance in Natural Networks

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(In)Balance in Our Financial Network

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Plan

• Why is our money not neutral?

• Solution: complementary currencies?

• Some Examples

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Number of Social Purpose

Complementary Currencies

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“Never, ever, think outside the box.”

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10 years

$ 100

$ 1,000 100 years

Currency with Positive

Interest @ 5%/year

Value discounted to today:

Currency with Demurrage

@ 5%/year

Demurrage = time-related

charge (opposite of

interest)

Value discounted to today:

$ 61.39 $7.60

$ 167.02 $ 168,903.82

Financial Viewpoint

Sustainability: The Monetary Engine What do we invest in?

Physical Reality

(Tree Metaphor)

Short-term thinking is not intrinsic to human nature, but created by today’s money

system

NB: Historical Precedents: Dynastic Egypt, “Age of Cathedrals”

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Structural Solution

Terra = standardized basket of dozen key internationally traded

commodities & services

10 lb. copper 10 bushels

wheat 1 ton carbon

emissions 1/10 oz Gold

4 x Less Volatility

than US$ Fully Backed

=> Robust

Inflation

Resistant

Storage costs =

3.5% demurrage

paid by bearer

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Structural Solution (2)

Issuing Mechanism (Example)

• Terra Alliance (“a virtual coalition of the willing”) issues electronic Terra as inventory receipts for goods sold to it by producers. Example: oil company sells 1 million barrels to

Terra Alliance, gets credited with Terras at market prices, and can use Terras to pay suppliers…

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Win/win Solution Benefits to the Financial Sector

• Terra makes countertrade bankable • Terra is only contractual and planning

instrument, Terra is countercyclical stabilizes

world economy

• More stable and predictable international currency that is nobody’s national money

• Systemically less Short-termism

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Win/win Solution

Benefits for everybody • Use of Terra as

reference currency makes it profitable to think long-term…

=>Makes Sustainability a realistic global objective

• Realigns shareholder’s interests with society’s

=>Reversing the hourglass?

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Some Existing Examples

• WIR: B2B currency that stabilizes Swiss

economy since 1934

• Dual Currency Banking: reduces poverty

(Brazil)

• Fureai Kippu: elderly care through 480

systems (Japan)

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New Examples

• Terra: A global currency that makes it

profitable for multinationals to think long-

term

• Civics: Makes possible bottom-up

Keynesian relaunch without debt

• Etc. etc. etc.

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Our international monetary system is in…

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• Matrifocal Societies

Dual Currency Systems

– Partriarchal one for long-distance

– Different type of currency (bottom up) for local exchanges

• Promotes:

– Economic stability for centuries

– General well-being for the “little people”

– Builds and sustains community

• Patriarchal Societies

Monopoly of

centralizing Currency

with interest => Great for Industrial Revolution

• But Promotes:

– Booms & Bust cycles

– Concentration of wealth

– Destroys community

(incompatible with gift

economy)

Value Shift

Patriarchal vs. Matrifocal

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Conclusion

• Rethinking the money system

is a necessary condition for

sustainability

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•www.lietaer.com

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Follow Up

• www.lietaer.com

• Articles in 4 different peer-reviewed

journals

• => see www.lietaer.com/research