Bernard Lietaer

Monetary Diversity Why and How?

Bernard LIETAER

[email protected]

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?


Four Simple Questions

• How is the money monopoly enforced?

By law?

By taxes?

• What is money?


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


Plan

• Why is our money not neutral?

• Solution: complementary currencies?

• Some Examples


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’


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


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


High Diversity

High Interconnectivity

www.egs.mmu.ac.uk

Low Diversity (Monoculture)

Low Interconnectivity

My.Opera.com


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…


Resilience

Efficiency

Balance in Natural Networks


(In)Balance in Our Financial Network


Plan

• Why is our money not neutral?

• Solution: complementary currencies?

• Some Examples


Number of Social Purpose

Complementary Currencies


“Never, ever, think outside the box.”

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”


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


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…


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


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?


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)


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.


Our international monetary system is in…


• 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


Conclusion

• Rethinking the money system

is a necessary condition for

sustainability


•www.lietaer.com


Follow Up

• www.lietaer.com

• Articles in 4 different peer-reviewed

journals

• => see www.lietaer.com/research

Bernard Lietaer

Business

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modern money

money monopoly

todays money system

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