Comments on Regulation YY to the Federal Reserve Board

The following comment was submitted to the Federal Reserve Board in response to requests for comments on its Regulation YY.

Regulation YY - Enhanced Prudential Standards and Early Remediation Requirement for Covered Companies  [R-1438] is a first step for a banking system that is to be transformed as part of a global financial and monetary overhaul.

The International Institute for Monetary Transformation agrees with the editorial in the New York Times of February 3, 2012 which argues that the regulators are to demand higher reserve requirements. The Institute agrees with a substantial and increasing number of economists who believe that the banking system is to be based upon a 100% reserves requirement.

However, the US banking, financing and monetary systems cannot be considered in isolation. More than ever in human history these global systems are intimately integrated. Thus, the International Institute for Monetary Transformation agrees with a significant number of economists who believe that the international financial system is not to be based on debt and be conducted through the services of  privately-owned banking systems, but on credit or money that is created by the public sector. What is also needed is an international monetary system that is based upon a standard, not a pure or flexible gold standard, but a carbon standard expressed in a specific amount of tonnage of CO2e per person. This position is still held by only a small, but growing number of monetary, financial and economic observers who believe that no lasting financial and economic change is possible without basing the international monetary system on a standard which, in the face of this century’s greatest challenge of avoiding a climate catastrophe, could be based upon the decarbonization level of a society. The more a society uses renewable energy, the stronger its economy and its currency.

For this to happen monetary justice is to be taking as a guiding principle in economic and climate negotiations as expressed in the international petition on  http://www.change.org/petitions/g20-and-rio-summitteers-make-monetary-justice-the-basis-of-your-negotiations For more information see www.timun.net, the NGO Treaty on Global Monetary Transformation which is in preparation for the Rio 2012 Earth Summit and for  in-depth information on this proposed carbon-based international monetary system consult the Institute’s forthcoming book The Tierra Solution: Monetary Transformation, Climate Change and Sustainable Development.

UN Draft and Report for Rio 2012 and monetary transformation

THE UN’S ZERO DRAFT, THE RPRP REPORT AND THE MONETARY CHALLENGE

Monday, January 30, 2012

During this month of January 2012 the UN Headquarters have been abuzz with both the Zero Draft produced by the two co-chairman of the Bureau for the Commission on Sustainable Development and the Resilience of People, Resilience of the Planet (RPRP)  by the High-level Sustainable Development Group (GSP) established on August 9,  2010 by SG Ban Ki-moon. Both of these two products, a draft and a report, are inputs into the Rio 2012 Earth Summit process.

How do they stack up in respect to a carbon-based monetary transformation as proposed by the International Institute for Monetary Transformation?

The Zero Draft is a minimalist document based upon a compilation document that had a very wide range of views, practices and proposals. It was a great disappointment to many that this draft had not more substance.

The RPRP report which was launched today in Addis Ababa,  is a serious attempt to analyze the present world situation,  it points to 8 drivers of change and proposes recommendations, one of which is the important one dealing with a Global Sustainable Development Council. It would replace the nearly two decades old Commission for Sustainable Development which received failing marks.  Recommendations 52 and 53 read: “263. Governments should consider creating a global sustainable development council to improve the integration of the three dimensions of sustainable development, address emerging issues and review sustainability progress, with meetings held on a regular basis throughout the year. This body could be a

subsidiary organ of the General Assembly and would replace the Commission on Sustainable Development. It would need to have a broad geographical and political membership and to fully engage relevant international institutions —including United Nations agencies and the international financial institutions —and non-State actors from civil society, the private sector and science. 264. Such a council would develop a peer review mechanism that would

encourage States, in a constructive spirit, to explain their policies, to share

experiences and lessons learned, and to fulfill their commitments.”

Though the global economy was mentioned many times, both in terms of past and future developments, and its connection with the financial system highlighted several times, the terms monetary and monetary system, let alone monetary transformation, was not mentioned. The monetary connection with the financial system could have been identified, both analytically and programmatically.

An important event in terms of a carbon-based international monetary system was a meeting on January 26 at the New Economics Institute in Manhattan where some forty representatives of NGOs held their first international consultation on the production of NGO sustainability treaties for Rio 2012 Earth Summit. These treaties would be similar to those over three dozen sustainability treaties produced during Rio 1992. About a half a dozen participants expressed interest in being part of the treaty cycle on monetary transformation. I volunteered to send the first draft of this treaty to them for their feedback and expand the treaty cycle after their comments. This draft will be uploaded to the www.timun.net in the next couple of days.

Comment to Financial Times Opinion piece

Lorenzo Bini Smaghi, a former member of the Executive Board of the European Central Bank and currently Visiting Scholar at Harvard’s Weatherhead Centre for International Affairs, wrote an Opinion piece in the Financial Times, entitled “How to equip the IMF for the crises of our time”  http://www.ft.com/intl/cms/s/0/eb455494-483d-11e1-b1b4-00144feabdc0.html#axzz1kgeG2rDO I posted the following comment. Lorenzo Bini Smaghi has made several good points to make the IMF more effective in the short run. His conclusion that “deep thinking and strong leadership are urgently required” is a correct one.

However, before one can effectively equip the IMF for our times it is necessary to understand the present global monetary dimension of the financial crisis. The international monetary system which as glue binds together the monetary, financial, economic and commercial systems is dysfunctional in several ways, because it is not based on equity, sustainability and therefore cannot be a stable system. First, as recommended by the 2009 UN Stiglitz Commission, the U.S. dollar as a reserve currency has to be replaced by a multi-currency reserve or SDR facility to start with. Secondly, the international monetary system needs a standard. Though there are several observers, particularly in the Republican fold in the USA, who advocate a return to a pure or flexible standard, this writer has been proposing a carbon standard, not only to give an equitable and sustainable basis for its stability, but also to combat this century’s greatest challenges of climate change and sustainable development. A carbon-based international monetary system would emphasize the level of decarbonization of a society greatly determines the strength of its economy and its currency. Such system would have a balance of payments mechanism that would balance both financial and ecological credits and make imaginative exchanges possible between these two types of debts because of the financial creditors in the North are ecological debtors to the South. This carbon-based international monetary system would be administered by a Global Central Bank the idea of which has been proposed for over one hundred fifty years. Note that this Bank of Central Banks would govern over a financial system that would be based upon credit, not on debt and over a banking system that would be based upon 100% reserves and thus does not engage in money creation anymore.

I think the proposed carbon-based international monetary system presents the “deep thinking” that is needed to simultaneously deal with both the unstable and dysfunction monetary system, with the ever increasing amount of GHGs and with the poor accomplishments in global developments that enrich the few, impoverish the many and imperil the planet.

2012 and the Tierra Solution

2012 AND THE TIERRA SOLUTION

Wednesday, January 04, 2012

The year 2012 will be an important year for the Tierra Solution. In April The Tierra Solution: Monetary Transformation, Climate Change and Sustainable Development will be on the market. At that time a well developed publicity strategy and a well-developed organizing strategy with national Tierra Solution Working Groups will be launched after earlier scattered attempts in both areas. In June the Rio 2012 Earth Summit is to take place where the issues of green economies, global governance are two main themes to which The Tierra Solution can make a genuine contribution. This contribution has been made by having the proposed carbon-based international monetary system become one of the ten “thinkpieces” of the Stakeholder Forum, several inputs in the UN Headquarters process and its inclusion in UNCSD Compilation document. A book launch at the UN in April or May may further infuse the feasibility of the Tierra Monetary Compact into the Rio process.

Notwithstanding these efforts The Tierra Solution (TSN) will not find great acceptance in 2012, mainly on account of its transformational nature. The TSN requires people to think outside the famous box because it does not reform but goes beyond the present form of financial and climate institutions by its trans-formational approach. Furthermore, its acceptance depends on many external circumstances, particularly in the economic, financial and monetary fields. The worse the global economic, financial and monetary systems perform and the more salient become the impacts of an increased global warming, the faster people, pundits and policy makers will consider the TSN becoming a realistic alternative as already Maurice Strong and Bill McKibben think it is.

According to UN economists 2012 will be a make-or-break year in terms of proceeding with slow economic recovery or falling back into recession. Their WESP 2012 observes: “The developed economies are on the brink of a downward spiral enacted by four weaknesses that mutually reinforce each other: sovereign debt distress, fragile banking sectors, weak aggregate demand (associated with high unemployment and fiscal austerity measures) and policy paralysis caused by political gridlock and institutional deficiencies. All of these weaknesses are already present, but a further worsening of one of them could set off a vicious circle leading to severe financial turmoil and an economic downturn.” (http://www.un.org/en/development/desa/news/policy/risks-for-another-global-downturn-have-heightened.html)

To these four weaknesses has to be added the weakness of a dysfunctional international monetary system that being the linchpin of those global systems makes them all more volatile and unstable. Removing its expensive and unnecessary global reserve system by the introduction of a monetary standard such as the carbon standard would go a long way to increase equity, sustainability and, therefore, stability in all these global systems. Notwithstanding the recommendation of the 2009 UN Stiglitz Commission to move away from a one country or even on region based international reserve currency, very little progress has been made. Notable, however, is the beginning of an uprooting process by the replacement of the U.S. dollar as the international transaction currency. China and Japan, China and Brazil and other pairs of countries have started trading with each other without using the U.S. dollar. The U.S. dollar as a reserve currency is, unfortunately, still strongly ensconced, particularly also due to the fact of the weak euro, the second largest international reserve currency. Image what the world would look like if the U.S. government were to decide to move away from having the U.S. dollar used as a reserve and transaction currency in favor of a carbon standard and of a Global Central Bank that would unify the divergent approaches of the US Fed and the ECB in dealing with the economic malaise and crisis in most countries!

The Tierra Triple Transformation in global governance

THE TIERRA TRIPLE TRANSFORMATION IN GLOBAL GOVERNANCE

Tuesday, January 03, 2012

During this new year the issue of global governance will be a major theme at the Rio 2012 Earth Summit in June, a crucial event for this decade and probably for the 21^st century. It will also continue to feature as a major challenge after the Summit given that the present world situation’s fragmentation in the economic and political fields demands greater cooperation in developing workable global institutions.

Effective global institutions that can deal with the economic and climate crises are ideally rooted in three interrelated and integrated transformations: a monetary, banking and a financial transformation. While the latter two transformations are increasingly being discussed and considered necessary, the first transformation still escapes solid scrutiny. The Tierra Solution (TSN) proposed by the International Institute for Monetary Transformation foremost focuses on monetary transformation. It is able to integrate all three transformations.

The monetary transformation of the TSN is considered the basis for the banking and financial transformation, for like any monetary system it acts as glue, lubricant and linchpin of the financial, economic and commercial systems Once the international monetary system is transformed, it will transform or at least greatly change the other global systems that are part of any global governance system. The Tierra international monetary system is transformed by the introduction of a standard, not a pure or flexible gold standard, but a carbon standard. This carbon-based international monetary system would push nations to decarbonize their societies because the greater their level of decarbonization, i.e. the wider use of renewable energy the stronger their economies and their currencies. Thus, this transformed basic system would combat climate change and advance sustainable development, two areas the accomplishment of which would determine the quality of any future global governance system.

In order for this basic monetary transformation to take place a Global Central Bank is needed that is able to monitor and control the banking and financial sectors. The former would not be engaged anymore in the creation of money or, in other words, would operate on a 100% reserve requirements, while the latter would not be based on debt anymore, but on credit that would be circulated into the economy by the public sector.

The Great Monetary Transition

This is a copy of a blog posted on December 21 to www.globaltransition2012.org  under the heading “The Great Monetary Transition”.

Part of the Global Transition2012 is the transition from a dysfunctional international monetary system to one that is based upon equity and sustainability, thus leading to monetary stability with its reduction in volatility in exchange rates, currency manipulation and speculation.

Such equitable, sustainable, and, therefore, stable international monetary system can be achieved by the introduction of a carbon monetary standard. Such standard would not only make national currencies convertible and the global reserve system which costs developing countries some $100 billion annually, unnecessary, but would also combat the climate crisis and advance low-carbon development in both the South and North. Thus, three major global problems can be simultaneously resolved by integrating their solutions rather than approaching them sequentially. For more information, see www.timun.net and my “thinkpiece” on http://www.earthsummit2012.org/index.php/pubs/sf-publications/412-sdg-thinkpieces); for full details see my forthcoming book entitled The Tierra Solution: Monetary transformation, climate change and sustainable development.

With enough civil society support, nations at the Rio 2012 Earth Summit could add to their present SDGs the Sustainable Development Goal of “Rethinking the international monetary system to be based on a carbon standard”. As a matter of fact, line 265 the DPI/NGO Declaration of the Bonn September conference invites governments to do exactly that.

Accepting that sustainable development goal for the transformation of the international monetary system the Rio 2012 Earth Summiteers could decide to establish a UN Commission to that effect. It would update and go beyond the recommendations of the 2009 Stiglitz Commission.

I fully agree with Geoff Lye, chairman of SustainAbility, in OUTREACH of December 16 believing that government, business and civil society are “to recognize that future solutions need to be fundamental rather than incremental; collaborative rather than competitive; and working to shift systems rather than part of it.”

Meeting the gold standard community

Meeting the gold standard community.

Tuesday, December 20, 2011

Comments to the article in http://www.forbes.com/sites/ralphbenko/2011/12/19/the-death-certificate-of-the-paper-dollar-where-to-next where the mentioned authors represent the who is who in the US gold standard community.

I am a practitioner of the sociology of sustainability and unsustainability with a focus on reducing the dysfunctionality of the international monetary system and finding effective ways to combat the climate crisis.

I agree with all the persons mentioned in this article that we need a monetary standard. As a matter of fact I have almost all their books in my personal library and have read them, the last one being by Rickards. However, I am not in agreement with using a pure or flexible gold standard to stabilize the international monetary system.

Having the conservative platform of 2012 include the discussion of a standard-based international monetary system is an important element, because the international monetary system being the glue of the financial, economic and commercial systems is hugely underestimated. It seems that only 1% of all economists are monetary economists. Also the general public is not versed in issues such as the expensive global reserve system that costs developing nations some $100 billion annually.

The main question in the article deals with the issue of how bringing about the introduction of the gold standard. The real question, in my opinion, should be broader and deals with the choice of a monetary standard and how it can be implemented. Thus, I would like to propose a monetary standard based upon carbon.

Basing the international monetary system on a carbon standard, i.e. a specific amount of tonnage of CO2e per person—the present dysfunctional international monetary system would be made more functional and, what is even more important—at least in my view and not in the view of most of the authors in the article I assume— such transformed international monetary system would combat the climate crisis and advance low carbon development. Thus, societies that decarbonize i.e. use renewable energy sources and have climate sensitive land use and forestry policies will have stronger economies and consequently stronger currencies. This integrated approach to resolving three major crises—the dysfunctional international monetary system, the climate crisis and the unsustainable model of development— is presented in a book-length publication entitled THE TIERRA SOLUTION: Using a transformed international monetary system to combat climate change and advance low carbon and climate resilient development, to be published by Cosimo Books in April 2012. For those who are curious and cannot wait that long can visit the website of the International Institute for Monetary Transformation at www.timun.net or google the terms monetary transformation.

Monetary democracy and monetary justice

Monetary democracy and monetary justice

Tuesday, December 20, 2011

This post is part of the GTI forum of the www.tellus.org called “On the money”. It was in response to Gwendolyn Hallsmith’s reference on monetary democracy.

Hi, Gwen and others:

Monetary democracy does not only happen “Where we reclaim our constitutional right to issue the coin of the realm, and take it back from the banks”—so well expressed in the 1865 Senate document of Lincoln’s monetary policy as found in http://www.businesscycles.biz/docs/lincolnpolicy.htm — but also when people globally are able to determine the shape of the international monetary system. This would include the choice of basing that system on a standard or continue with the present system of high volatility in various asset markets, currency manipulation and speculation and an expensive global reserve system that costs developing countries some $100 billion annually.

This choice of an alternative to the global reserve system is not raised by the economic profession of which only 1% of its practitioners are engaged in monetary economics.  Removing the global reserve system rather than reforming it a little bit and basing the international monetary system on a standard means that national currencies become convertible or that a global currency becomes possible which by its very nature is convertible.

As mentioned in an earlier comment this month and in several others over the last couple of years I think that the introduction of a carbon standard is the most appropriate pathway to make the international monetary system best serve the financial, economic and commercial systems. Some economists are willing to accept the possibility of a carbon-based international reserve currency to replace the U.S. dollar and other reserve currencies, but not a carbon-based monetary standard. One of the reasons that they and many other social scientists are not looking into this transformational monetary approach is the lack of integrative thinking where the climate crisis is considered to be resolved sequentially, i.e. separately, in its own silo rather than simultaneously.

Personally I prefer to use the term monetary justice rather than monetary democracy. It would indicate not only the social, environmental, procedural and intergenerational injustices that take place in the present dysfunctional international monetary system, but also the injustice that is taking place by not having an equitable, sustainable, and, therefore, stable international monetary system. It can be argued that monetary justice in this comprehensive sense can be the guiding principle of global governance model for the Rio 2012 Earth Summit, integrating as it does the three pillars of sustainable development.

The euro crisis solutions and the Tierra Solution

The euro crisis solutions and the Tierra Solution

Tuesday, December 20, 2011

Following the December 9th EU Summit, European leaders are using a threefold approach to stabilize the euro crisis. The first prong of this strategy is provided by the corrective measures to be enacted by euro-area national governments in the context of sharpened EU surveillance and disciplining sanctions. The second prong or line of defense is offered by a potential financial firewall that a stepped-up IMF can erect around the vulnerable sovereigns of the euro area, such as Italy and Spain, through lending programs with conditionality. The third and last line of defense would be the ECB itself which would take the burden of any residual systemic pressures that the two previous layers would be unable to stabilize.

If these three lines of defense were to synergistically work—still a major question—the euro crisis could be stabilized for the moment, but the crisis itself would not be resolved. There is a bevy of other factors that are needed to be considered to produce an equitable, sustainable and stable currency for the Euro zone and non-Eurozone European countries.

One of them, and probably the most important factor to be considered, is the Euro zone’s connection with the international monetary system of which it is an inextricable part. As long as this international monetary system remains dysfunctional, the euro crisis cannot be resolved on a permanent basis of equity, sustainability and, therefore, stability. The big question becomes how European and other global leaders are able to make this international monetary system more functional, equitable, sustainable and, consequently, more stable.

Time has come to add to the three lines of defense for stabilizing the euro crisis a fourth component, i.e. a proactive policy development program that considers the reintroduction of a monetary standard which would remove the gross volatility, the hallmark of the present system. Rather than basing this standard on a gold—be it pure or flexible—standard, it can be based upon any material or immaterial standard that, John Maynard Keynes’ terms, is considered valuable and accepted as such by a local community or state. The Tierra Solution proposes to take carbon as a standard—a specific amount of tonnage of CO2e per person—, given that decarbonization of societies is humanity’s greatest challenge in the 21^st century in coping with the catastrophic effects of an ever increasing amount of CO2e emissions.  

Monetary justice as guiding principle

MONETARY JUSTICE:

The guiding principle for the structure of the zero draft of the outcome document?

Presented at the Second Intersessional of Rio 2012 Earth Summit

Frans C. Verhagen, M.Div., M.I.A., Ph.D., sustainability sociologist

International Institute of Monetary Transformation (IIMT) , www.timun.net; gaia1@rcn.com

UN Headquarters, 14-16 December 2011

“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, 1890s

INTRODUCTION

Monetary justice is the ethical principle that underlies the Tierra Fee & Dividend (TFD) system, the IIMT’s carbon-based international monetary proposal. The TFD is presented as a transformational pathway of an integrated solution to a non-working international monetary system, an increasing global threat of catastrophic climate change and an unsustainable model of development.

A main theme of Tierra Fee & Dividend (TFD) system, following Emerson’s observation, is the need to first search for principles before searching for methods. One of the main shortcomings in UN conferences and negotiations seems to be a basic lack of interest, unwillingness, or inability in dealing in a substantial and coherent way with the ethical dimension of the various global challenges the UN and the world community face.

Thus, the main premise of the TFD system is that no stability in the monetary, financial, economic and commercial systems is possible without the principles of equity and sustainability. Underlying the principle of monetary sustainability is the principle of monetary justice not only in its social, ecological, procedural and intergenerational meanings, but especially in its transformational meaning as the ethical foundation of a carbon-based international monetary system. Monetary justice is proposed here to be the main guiding principle that unifies many other important principles as spelled out in the recent Bonn DPI/NGO Declaration. Monetary justice is proposed here to function as the organizing principle for the much discussed integration of the three pillars of sustainable development as called for by the UN SG Report of December 2010 and in various DESA Reports. Consequently, monetary justice is suggested to be the guiding principle for the structure of the Zero Draft, the three main parts of which would consist of the explanation and application of the monetary justice principle, the various suggestions in the Compilation document that deal with the development of a global institutional framework and the more numerous suggestions that deal with green economies and low-carbon and climate resilient development.

            The world over,  millions of people are demonstrating and protesting  the gross inequality between people and demand basic overhaul of the monetary, financial, economic and commercial systems, because these systems do not work for the 99% of them as these systems continue to enrich the few, impoverish the many and imperil the planet. It is most important that government, business and civil society leaders in the Rio process respond to this demand for fundamental and transformational change in the world’s global systems which unlike physical systems are human made and, consequently, can be changed and even transformed. It is possible to achieve this global

transformation if the world’s most basic global system, i.e. international monetary system is transformed. By introducing a carbon standard, not a pure or flexible gold standard, this transformed international monetary system would not only transform the dysfunctional international monetary system, but, at same time, provides a realistic pathway to stabilize the climate and to bring about a low-carbon  and sustainable model of development. Such monetary transformation is a practical, though very challenging way, to integrate the three pillars of sustainable development, a main objective of the Rio 2012 Earth Summit.

 MONETARY JUSTICE in its regular and transformational sense

International monetary justice is not only the application of social, environmental, procedural and intergenerational justice principles to the present international monetary system, but also the application of these various forms of justice to a transformed international monetary system. International monetary justice in the latter, transformational or integrated sense, argues that, as a matter of justice, government, business and civil society are to pursue a carbon-based international monetary system that would remove monetary injustices such as the global reserve system, would honor the right of a stable climate in the interest of both Earth and human wellbeing and would promote human rights.

There is little social, environmental (climate), procedural and intergenerational justice in the present international monetary system, the climate system and the human relations system. These injustices can reduced simultaneously by the pursuit of the proposed carbon-based international monetary system which is described in some detail in the Stakeholder Forum’s http://www.earthsummit2012.org/index.php/pubs/sf-publications/412-sdg-thinkpieces and in great detail in the forthcoming Cosimo book-length publication THE TIERRA FEE AND DIVIDEND SYSTEM: Using a transformed international monetary system to combat climate change and advance low carbon and climate resilient.

Such carbon-based international monetary system is possible if government, business and civil society and particularly their leaders are able to think outside the box. Such thinking  is demonstrated by Maurice Strong who believes that basing the international monetary system on a carbon standard is “innovative” and that such system “seems to be very promising particularly in light of the stalemate in post-Kyoto prospects” (October 8, 2010 email); by author Bill McKibben, leader of the global www.350.org  who believes that a carbon-based international monetary system is on “one of the remaining possibilities” given that  physics and politics increasingly narrow our possible paths of action ; by those who signed an international petition entitled “Make monetary justice the basis of your Rio negotiations”  at http://www.change.org/petitions/g20-and-rio-summitteers-make-monetary-justice-the-basis-of-your-negotiations Needed for this transformed international monetary system is a plan that would lead to a financial system that is credit- rather than debt-based and that would be democratically governed by a Global Central Bank. The Chicago Plan of the 1930s was proposed by many outstanding economists to deal with the Great Depression. It withdrew the privilege of fractional reserve banking by privately-owned banks, making them utilities without the privilege of creating money and of owning over 90% of the money supply.

CONCLUSION

The September 2011 DPI/NGO Bonn Conference’s Declaration states in line 265 that governments, among many other things, are “to rethink the monetary system based upon a carbon standard.” Given that the Earth Summit wants to develop “New Foundations for the Future”, it is  essential that among those foundations the monetary foundation is going to be considered because it is the international monetary system functioning as glue, as a lubricant for the other international system that can be considered to be the linchpin of those systems. As a consequence it is crucial that the Rio 2012 Earth Summit process basing itself on the requirements of monetary justice give priority to monetary governance as the basis of governance systems for the 21^st century.

The Tierra Monetary Compact

The Tierra Monetary Compact

Monday, December 12, 2011

This new nomenclature of the Tierra Fee & Dividend system, the Tierra system or The Tierra Solution is only new in terms of name, not in terms of content. It was first used on December 7, 2011 as part of the 5^th High Level Dialogue of Financing for Development at UN Headquarters. The Dialogue’s focus was on the two main UN conferences on financing for development: the Monterrey Consensus of 2002 and the Doha Declaration. It was suggested in the IIMT’s 2 sided, one page golden rod circular that a monetary compact of a carbon-based international monetary system might be the ultimate goal in financing of not only development, but also of climate measures. The circular can be found in the IIMT Documents section, http://www.timun.net/documents.php?dcat=3

Twice I was given the opportunity to speak to the feasibility of considering the Tierra Monetary Compact (TMC), once in a side event and, more importantly, in an official General Assembly Dialogue meeting. In both cases, participants paid attention without being able to respond to the interventions.  They, the 100 circulars and personal interactions are part of making people think outside the box for a pathway that integrates three major global problems of a dysfunctional international monetary system, ineffective climate negotiations and an unsustainable development model.

Beyoond the November liquidity injection

BEYOND THE NOVEMBER 30 LIQUIDITY INJECTION

Thursday, December 01, 2011

There seems to be general agreement that the six central banks’ injection of dollar liquidity into the Eurozone banks is only a temporary measure and does not deal with the real sovereign debt problems of several of its member states. Even the strengthened euro is back again after one day to its pre-injection level.

There are at least two pathways that will be more effective in making the Eurozone sustainable. The first one is well explained by Ellen Brown’s article in http://www.huffingtonpost.com/ellen-brown/the-ecb-fiddles-while-rom_b_1117193.html?view=print&comm_ref=false entitled “The E.C.B. fiddles when Rome burns”. In it she shows that article 123, paragraph 2 of the Lisbon Treaty permits the ECB to lend to publicly owned banks. By treaty cannot lend directly to its member governments. She thinks that if France had borrowed from its own publicly-owned or central bank rather than from privately-owned banks starting in the seventies, it would have saved enough money by not having paid interest and by receiving dividends of its central bank that it could be debt-free now.

So, why is this public bank option not being used? Why should Eurozone governments be forced to borrow from privately-owned banking systems? Important questions that can not be answered here, because the second pathway has to be presented now.

The public bank pathway would be part of a larger conception of the global monetary, financial, economic and commercial systems. It is based upon an international monetary system that is transformed by the adoption of a carbon monetary standard. There are quite a few observers, many of them in the Republican and Hayekian fold who advocate sound money by way of a pure or flexible gold standard. They also understand that the international monetary system does not work without a proper standard. What the carbon standard does is not only making the international monetary system function properly as glue and lubricant of the other global system, but, as importantly, pushes nations to decarbonize their societies and thus combat the climate crisis, humanity’s major challenge for this century. Adopting this carbon-based international monetary system called the Tierra Fee & Dividend system or the Tierra Solution nations could spend money, not debt, into circulation for their economies and would not have any financial difficulty in financing the necessary mitigation and adaptation measures to combat the climate crisis. However bad the sovereign debt situation is in the Eurozone, the US and elsewhere, the drama that is being played out in the UNFCCC Conference in Durban might be more damaging in the long run for people, species and planet. What does it take for government, business and civil society to take the steps towards the Great Monetary Transformation and making monetary justice the guiding principle of global governance?

I believe with editor and author Bryant Harrison McGill who said, “Yearning for the seemingly impossible is the path to human progress”.

Australia's climate and energy strategy

AUSTRALIA’S CLIMATE AND ENERGY STRATEGY AND THE TFD

Tuesday, November 29, 2011

There are several outstanding elements to Australia’s climate and energy strategy:

1.      There is a ministry that institutionally integrates climate and energy policies;

2.      Australia takes the lead without waiting for others in setting a price on carbon and without being autarkic because it carefully considers its policies in the global context by linking it, particularly during the flexible period;

3.      It strikes a balance on carbon pricing during the fixed period of 2012-2015 where the price is set on $23 a ton of CO2 after which the price is subject to change to world markets during the flexible period of carbon pricing;

4.      It uses an upstream carbon taxing administration by taxing 500 companies instead of using a downstream method of carbon taxing millions of residents;

5.      It educates its citizenry by an exemplary website and publications, using modern mass media and involving youth and others

6.      Its tax and dividend system will ensure acceptance by the public who can save upon their carbon dividends by increasing personal energy efficiencies;

7.      Its carbon reduction method is fair and fast: polluters pay starting in July 2012;

8.      Its sets clear emission targets: 5% by 2020 and up to 15 to 25 % depending upon the scale of  global climate action.

The Tierra Fee & Dividend (TFD global governance uses the Fee & Dividend carbon reduction method which is slightly different from the tax and dividend method and shares its being fair and fast.

In addition to the use of similar carbon reduction methods both systems integrate climate and energy, but in different ways. The TFD brings in the issue of a dysfunctional international monetary system which is being used to combat the climate crisis and advance sustainable development. By transforming that system by basing it on a carbon standard, a society’s currency and economy is strengthened to the extent it decarbonizes and engages in a renewable energy infrastructure.

Given that Australia has taken leadership in devising an innovative climate and energy strategy, could it become the first country that would take leadership at the 2012 Rio Conference to have the TFD global governance system considered as an integrated alternative for global economic, social and environmental development? In various ways the International Institute for Monetary Transformation is reaching out to various governmental and non-governmental organizations in Australia to make that a reality.

Response to Reuters talking about euro-demise

RESPONSE TO REUTERS TALKING ABOUT EURO-DEMISE.

Tuesday, November 29, 2011

In addition for Reuters piecing together a “picture of patchy preparedness for the possible demise of the 12-year-old euro currency” (http://www.reuters.com/article/2011/11/29/us-euro-zone-contingency-idUSTRE7AS0H020111129?feedType=nl&feedName=ustopnewsearly)  Reuters could also put together a picture of alternatives not only to the euro problems, but to problems in the international monetary system. Thus, a picture could emerge where the banking system would not engage in money creation, where the international financing system is a credit- rather than debt-based system and, finally, where the international monetary system which as glue binds the global systems together adopts a monetary standard, not a pure or flexible gold standard, but a carbon standard. Adopting a carbon standard would also resolve humanity’s major challenge of the 21^st century, i.e. the climate crisis. Curious how this would work? See www.timun.net and the forthcoming Cosimo book THE TIERRA SOULTION: Using a transformed international monetary system to combat climate change and advance low carbon and climate resilient development.

Christine Lagarde's lost decade

CHRISTINE LAGARDE’S “LOST DECADE”

Wednesday, November 09, 2011

Googling the above terms this morning some 100 papers, magazines and blogs dealt with her speech at China-India annual financial forum. It would be most interesting and educational to study the reaction to this speech and learn to what depth the communication of this important speech has been dealt with. My first impression is little depth, at least in the first day of its presentation, having looked at the coverage of Businessweek and the India Times.

This “lost decade” speech is important because she, as executive director of the IMF, has a global view and secondly because she attended the G20 Summit in Cannes last week. It took place after two presidents in the Euro zone were removed from their positions and when Italy’s bond payments passed the 7% limit, bringing this huge Italian economy into the fold of countries that will have to be bailed out.

Lagarde’s message was clear: cooperate or otherwise the global economy will go from bad to worse and the decade may be lost in the same way Japan’s decade of the 1990s was lost by being unable to come up with proper domestic and international policies.

What is Lagarde presenting as a solution in the short and long term? She pleads with Russia and China to contribute to the Euro Bailout Fund so that the Eurozone does not fall apart. Her view for long term solutions or solution is more exhortatory of being cooperative and bold without indicating what that boldness could consist of. We have to “keep our eyes on the big prize—a strong, sustainable and balanced recovery”. Should it be more of the same? Should it be recovery or transformation? Where is the equity dimension of the recovery? How are the demands of the global protest movement penetrating the IMF, the ears of the Euro Area Leaders, the G20 Summiteers? Why not tackle the international monetary system first: everybody knows that the world is based upon money—at least in the industrialized and industrializing nations where barter is almost completely absent? Why not integrating the dangerously precarious global economic situation and the climate crisis challenge into a monetary system that tells nations that in the long term those nations that decarbonize their societies the most are the ones that will have the strongest economies and currencies? Why should Lagarde not start talking of taking monetary justice as the guiding principle for global governance rather than only pointing to China’s increased political and economic power as a favorable (?) change in global governance?