Justice and the International Monetary System

OVERVIEW

• Shortcomings of the International Monetary System which is argued to be unjust, unsustainable, and, therefore, unstable
• Responses to this system after 1971
  • SDR - Special Drawing Rights
  • Floating exchange rates
  • The Tierra Fee and Dividend (TFD) system
  • Block-chain monetary systems, such as Bitcoin
• Monetary justice: what, why and how as the basis of the proposed carbon-based international monetary system
• Challenges of Christian Americans and the Duke Chapel Congregation

THE INTERNATIONAL MONETARY SYSTEM (IMS)

• Components
  • Currencies and reserve currencies
  • Exchange rates: fixed or floating
  • Balance of payments
  • Monetary standard: gold, dollar/gold, fiat, carbon
  • Monetary philosophies: apolitical Mishkin, political Erturk
• Quality or effectiveness of present system
  • Non-system; called criminal by Robert Mundell
  • National or regional reserve currencies cause global financial imbalances
  • Currency speculation/manipulation and instability
  • 140 banking crisis between 1970-2010

SHORTCOMINGS OF THE PRESENT INTERNATIONAL MONETARY SYSTEM (IMS) - 1

• Sir Mervyn King, Governor of the Bank of England, who, in February 2011, remarked (in too measured terms): "Global imbalances are a reflection of today's decentralized international monetary and financial system. All the main players around the world are rationally pursuing their own self interest. But the finance crisis has revealed that what makes sense for each player individually does not always make sense in the aggregate."
• The world's premier monetary economist and Nobel economics prize winner Robert Mundell considers the international monetary system a non-system and calls it "criminal".

SHORTCOMINGS OF THE IMS - 2

• The present system is unjust, unsustainable, and therefore, unstable
• Unjust because
  • The neoliberal philosophy of Group 7/8/20 and its institutions such as the IMF, the Basel-based Bank of International settlements
  • Reserves arrangement where non reserve-currency nations are forced to pay for dollars, euros, yens, etc subject to the latter's currency fluctuations
  • IMF is not a bank, but a fund controlled by the USA on account of the distribution of shares
• Unsustainable because of lack of monetary justice
• Unstable because of its political character where might reigns over efficiency

SHORTCOMINGS OF THE IMS - 3

• Unregulated capital flows of free market fundamentalism leading to limited planning and lack of stable foreign direct investment
• Currency wars, manipulation and speculation
• Exchange rates volatility
• An expensive global reserve system
• No standard: non-system, criminal according to Nobelist Mundell
• 140 episodes of banking crises in 115 economies in the world in the period 1970-2011

SHORTCOMINGS OF THE PRESENT IMS: CAPITAL FLOWS

• Capital flows and quantitative easing by USA
  • BRICS March 2012 meeting: Dilma Rousseff, Brazil's president, accused western countries of causing a "monetary tsunami" by adopting aggressive expansionist policies such as low interest rates, which are making emerging economies less competitive globally. "This crisis started in the developed world," Ms. Rousseff said. "It will not be overcome simply through measures of austerity, fiscal consolidations and depreciation of [labour costs], let alone through quantitative easing policies that have triggered what can only be described as a monetary tsunami, have led to a currency war and have introduced new and perverse forms of protectionism in the world."

RESPONSES TO THE UUTU IMS

• Short-term responses
  • Muddling through with the IMF within a neoliberal governance philosophy
  • Emergence of block-chain based electronic currencies such as bitcoin
  • Harking back to a gold standard
  • Three fold long-term responses to present economic crises
    • Money creation by public sector, not privately-owned banking systems with fractional reserve system
    • Money-based, not debt-based financial system
    • A carbon-based international monetary system with a monetary standard of a specific tonnage of CO₂e per person based upon monetary justice

MONEY CREATION: A HISTORY

• Public banking: It is well known that Philadelphia was the birthplace of the U.S. Constitution and American democracy. Less well known is that it was also the birthplace of public banking in America. The Philadelphia Quakers originated a banking model involving government-issued money lent to farmers. The profits returned to the government and the people in a sustainable feedback loop that prospered the local economy.
• North Dakota
• Public Banking Institute

EVALUATING THE IMF

• IMF policy recommendations: Not enough change after the crisis.
• transformation of the international monetary system needed not reform on the fringes of the IMF
• updated return of the Keynes' BANCOR and International Clearing Union by basing it on a carbon standard rather than gold or SDRs
• BRICS nations threatening IMF/WB during their March 2012 meeting

SHORTCOMINGS OF THE IMS: CURRENCY WARS

• US-China currency wars, salient after 2008
• US-Brazil currency wars, salient after 2010
• Rousseff seeks US support in 'currency war'
• The Brazilian president, who has accused big western powers of loose monetary policy, has taken her call for action to the White House - Apr 9 2012
• Brazil flexes its muscle to shield industry
• A clash with Mexico, tight rules over oil, higher import taxes and currency controls suggest Brazil is rekindling protectionist instincts - Mar 19 2012
• Brazil vows to protect manufacturing
• 'We are not going to just sit by and watch while other countries devalue their currencies to give them a competitive advantage' - Mar 16 2012
• Brazil launches fresh 'currency war' offensive
• Moves to suppress an appreciation of the local currency range from taxes to interest rate cuts, despite the real being relatively weak - Mar 15 2012
• Brazil extends tax on foreign loans
• Flow of overseas cash, blamed for overvaluation of real, sees government step up currency war in effort to boost competitiveness - Mar 12 2012

MONETARY TRANSFORMATION THROUGH MONETARY JUSTICE

• Monetary justice Chapter in TSN, pp 124f and discussion of UN GSP 2011 Guidelines
• Fixed exchange rates
• Balance of payments of both ecological and financial debts and credits
• Global Central Bank: administering, monitoring, regulating, creating money
• Strategy for inclusion MJ into the Rio 2012 Earth Summit process and beyond:
  • Peoples Sustainability Treaty on Monetary Transformation.
  • UN Commission on Monetary Transformation, Climate Change and Sustainable Development , leading to UN Global Governance Conference where monetary justice is considered as the guiding principle for a new world order.

WHAT IS JUSTICE

• Social justice
  • Procedural and intergenerational
• Ecological justice
• Integrated justice
  • Contextual sustainability
  • Earth Charter/Universal Declaration of the Rights of Mother Earth - Cochabamba April '10
  • Low carbon and climate-resilient development within socially and ecologically just societies

MONETARY JUSTICE - WHAT 1

• An international monetary system that
  • includes social justice
    • Not ruled by G7/8/20 but G192 of the UN
  • includes ecological justice
    • Climate justice
    • Frugal trade
  • Includes an integrated vision of
    • Values such as the Earth Charter
    • Low carbon and climate-resilient development

MONETARY JUSTICE - WHAT 2

• Proposed Tierra Fee & Dividend system contributes to monetary justice by
  • Using the more equitable Tierra Fee & Dividend carbon reduction method over cap-and-trade
  • Introducing a carbon-based monetary standard that promotes climate justice
  • Making government regulators and drivers, being solely in charge of money creation by withdrawal of fractional reserve banking from privately-owned banking systems, leading to more equal distribution of power, credit and wealth and progress w/o poverty in the sense of Henry George

MONETARY JUSTICE - WHY 2

• Economic reasons for the Tierra Fee & Dividend system
  • Monetary system as glue of the financial, economic and commercial systems does not work: currency manipulation and speculation, costly global reserve system, no standard, etc.
  • Financial reasons
    • Fractional reserve banking privilege removed from the privately-owned banking systems, a main cause of the Great Recession, the Great Depression and other financial crises
  • Commercial reasons
    • Frugal trade promotes ecological justice
  • Ecological reasons for the TFD
    • The Fee & Dividend approach to GHG reduction is fast, formidable and fair

MONETARY JUSTICE - WHY 1

NO MONETARY JUSTICE IS POSSIBLE WITHOUT A MONETARY STANDARD AND A MONETARY VISION

"The continued expansion of free trade, the increased integration of financial markets and the advent of electronic commerce are all working to bring about the need for an international monetary standard - a global unit of account .... An important question is whether this process of monetary evolution will be intelligently directed or whether it will simply be driven by events .... In any event, it is imperative that the United States begin to develop and put forward its own global monetary vision for the future."

Economist Judy Shelton, US Congress, May 21, 1999

MONETARY JUSTICE - WHY 2

• Political reasons for the TFD
  • changes the present political economy which still enriches the few, impoverishes the many and imperils species and planet
  • Distributes monetary power more equitably
• Cultural reasons for the TFD
  • Contributes to a culture of social and ecological justice
  • Makes cultures in the global North and South direct their attention low carbon and climate-resilient development

MONETARY JUSTICE - HOW 1

• Going beyond monetary reform
  • Build on the best monetary reforms
    • Reserve currencies proposals by UNDESA and UNCTAD
    • UN Stiglitz Commission of 2008-9
      • Demand a more socially and ecologically just international monetary system

MONETARY JUSTICE - HOW 2

• Pursuing transformational change
  • Rethinking basics, particularly about money, credit, debt and wealth. Cf. www.monetary.org
  • Supporting the TFD or similar proposals
  • Removal of money creation function from privately-owned banking systems, following the Chicago Plan of the 1930s and present proposals of Robertson, Brown, Zarlenga, all of which are based on governments spending credit into circulation without becoming indebted to privately-owned banking systems. Cf. Henry George, Benjamin Franklin et al.

MONETARY JUSTICE - HOW 3

• Strategy from top via UN and from down via citizen action
• International Institute of Monetary Transformation
  • Emerged from Earth and justice Education Associates International (EPE) and its contextual sustainability framework
  • Book length publication The Tierra Solution: Resolving Climate Change Through Monetary Transformation, Cosimo Books, 2012
  • Many activities on www.timun.net

THINKING OUTSIDE THE BOX

• Almost all thinking is located in the outside of the inside of the famous box; it is not TRANSFORMATIONAL like the transformational Tierra Solution and its concept of transformational financing. Open-mindedness is required here.

BANKING PRESENT AND PROPOSED

• Money creation under fractional reserve banking
  • Originated during the middle ages when goldsmiths came upon the idea
  • Advantages and disadvantages
• Money creation under 100% reserves banking
  • Public sector creates money: colonial times, Lincoln
  • 1930s: Yale economist Irving Fisher and other economists
  • 2000s: Robinson of NEF in the UK; David Korten in the USA
  • 2009: AMI and Kucinich's NEED Bill

A TRANSFORMED INTERNATIONAL MONETARY SYSTEM SUCH AS THE TFD

• Components
  • Carbon-based monetary standard with Tierra as unit of account
  • Two options: National Currencies pegged to the Tierra or a common global currency of the Tierra
  • No reserve currencies needed anymore and currency speculation and manipulation are not profitable anymore
  • Exchange rates are fixed
  • Balance of payments includes a nation's carbon account
  • Monetary principles
  • Time permitting, bring up one the three main presentations: Columbia University, CONGO committee on sustainable development, or on Financing for Development
  • Way forward
    • Push for wider use of SDRs
    • Make input into UNFCCC, UNCTAD, UNEP, UNDESA as was done in preparation for Rio+20 during the 2011 NGO conference in Bonn.
    • Have TFD working groups be active for the further study of the conceptual, institutional, ethical and strategic dimensions of the Tierra system using the IIMT website www.timun.net

MONETARY JUSTICE IN CONTEXT-1

• Philosophical framework (Chp 6 of the TSN)
  • Contextual sustainability value-framework together with sustainability economics theory consisting bioregional focus, free, fair and FRUGAL trade, leading to formation of sustainable communities in the global North and South
• Monetary philosophies: apolitical Mishkin, political Erturk; 1% of economists are monetary economists
• Monetary principles, particularly monetary justice in its transformational sense. CoNGO SD Committee's Recommendation #10: Nations are urged to consider taking monetary justice as the guiding principle of sustainable (communities) development in the global North and South.

CONTEXTUAL SUSTAINABILITY FRAMEWORK

ECOLOGICAL INTEGRITY

• Pablo Solon on http://pablosolon.wordpress.com/2012/04/04/its-the-time-of-the-rights-of-mother-earth
• Nature is not a thing, a source of resources. Nature is a system, a home, and a community of living and interdependent beings.
• Nature has rules that govern its integrity, interrelationships, reproduction and transformation.
• States and society are not recognizing, respecting and making sure that the rules of nature prevail

CARBON-BASED INTERNATIONAL MONETARY SYSTEM'S COMPONENTS - 6

• Philosophical framework (Chp 6 of the TSN)
  • Contextual sustainability value-framework together with sustainability economics theory consisting bioregional focus, free, fair and FRUGAL trade, leading to formation of sustainable communities in the global North and South
• Monetary philosophies: apolitical Mishkin, political Erturk; 1% of economists are monetary economists
• Monetary principles, particularly monetary justice in its transformational sense. CoNGO SD Committee's Recommendation #10: Nations are urged to consider taking monetary justice as the guiding principle of sustainable (communities) development in the global North and South.

CoNGO FFD COMMITTEE's CHALLENGES - 4

• The Rio Recommendation:
  • Financing for Development Committee's proposed recommendation on transformational financing for Development and Climate: In order to make transformational financing for climate and development possible government, business and civil society are urged to consider overhauling the monetary, financial, economic and commercial systems by basing the international monetary system on the carbon standard of a specific tonnage of CO2e per person together a with a money- rather than a debt-based international financial system and a banking system with 100% reserves; government, business and civil society are also urged to seriously consider the transformational finance approach for development and climate where a Global Central Bank is the sole creator of money and credit (not debt).

NOMENCLATURE OF THE TIERRA CARBON-BASED INTERNATIONAL MONETARY SYSTEM

• The Tierra system, labeled after its unit of account of the Tierra in its monetary architecture
• The Tierra Solution, labeled after the unit of account of the Tierra and considered a global governance solution by resolving the climate crisis through monetary transformation
• The Tierra Fee & Dividend system (TFD) is named after the Fee & Dividend as proposed by James Hansen and Bill McKibben; this carbon reduction methodology is chosen because, unlike cap-and-trade and other methods, it is fast, fair and formidable.

EVALUATING THE IMF

• http://www.brettonwoodsproject.org/art-569843 IMF policy recommendations: Not enough change after the crisis.
• Transformation of the International Monetary System needed not reform on the fringes of the IMF
• Updated return of the Keynes' Bancor and International Clearing Union by basing it on a carbon standard rather than gold or sdrs
• BRICS nations threatening IMF/WB during their March 2012 meeting

Summary of the Tierra Solution (TSN) AS PRESENTED DURING THE OWS PROTESTS

EPE/NPA COURSE ON MONETARY JUSTICE

• MONETARY JUSTICE
• Questions being explored in this course are the following. What does monetary justice mean on the national, regional and global levels? Is it different from economic and financial justice? What are the monetary injustices, particularly on the global level? What can be done in reforming or transforming the international monetary system to achieve social and ecological peace? Could basing the international monetary system on a carbon standard to combat the climate crisis be a realistic means to achieve the purpose of monetary peace?

MONETARY JUSTICE FOR DUKE CHAPEL CONGREGATION

• Include monetary justice in Congregation programming
• Perhaps joining a TFD Working Group in the Triangle using a basic text the Verhagen 2012 book: "The Tierra Solution: Resolving the climate crisis through monetary transformation"
• Monetary Barn Raising
  • a tradition of "barn raising", whereby neighbors all band together to build barns. Barns were large, costly, and hard to build, but absolutely essential for farming. The lesson is simple: together, the community can accomplish what the individual cannot, and everybody benefits. We should think of pooling our global resources in precisely these terms.

CONCLUSION

• Einstein on problem solving:
  • "No problem can be solved from the same level of consciousness that created it."
• Needed are: boldness and vision
  • "Whatever you can do or imagine you can, do it. Boldness has power, genius and magic in it" Johann Goethe
  • "Without vision, people perish."
    Proverbs 28:19