GeoEconomics

another opinion: every state needs a public bank (to invest into key areas)

opportunity in crisis: for investors to buy key companies cheap?

opportunities… for whom?

those that already have a lot.

opportunities for populists and demagogues – who is shouting louder – people believe has a solution.

Hitler did a lot of “good things” especially for the farmers – at the beginning of his regime.

But we all now the bottom line was catastrophic.

Super rich people funded Hitler because they feared of their wealth being confiscated and given to “lazy idiots” by socialists and communists.

So would not be the solution – ongoing talks – similar to a “grand debate” – (a little better than Macron’s idea) – with key actors – from super wealthy – super poor – academics and politics – to come up with a solution – before things explode again and again.

Germany Shows Signs of Recession – Is the Global Economy Next?

the infrastructure is already screwed massively.

The gov wanted to get private investors to privatize the railway and the motorways.

But this kind of failed partly. Because investors want to buy only perfect roads not roads that need massive investments before generating revenue.

Also: Ex Finance Minister Scheuble (after failing to fix the cum-ex billions of tax fraud) imposed a policy of “Schwarze Null” – not increasing the governmental debt – halting investments.

This is what Greece did and we all know what happend.

Again: If private companies and families save money – that is okay – but the gov should not stop spending in crisis (when nobody is spending/investing) – because this risks halt of all of the economy and mass uneployment (as happened in Greece, Portugal was wise to go a different way)

August 15, 2019

 

Heiner Flassbeck argues that the China-US trade war is not having as much of an impact on the global economy as many assume.

China’s currency is not undervalued, despite its recent devaluation.

Rather, the undervalued Euro gives Germany a real competitive advantage in world trade.

It’s actually Europe’s economic weakness that is dragging down Germany, not China (src)

GREG WILPERT: Welcome to The Real News Network. I’m Greg Wilpert in Baltimore.

Indications are increasing that the US-China trade war might be leading the global economy towards a recession. One indicator of this is that Germany, which is often considered to be the economic motor of Europe, experienced an important decline in industrial production during the second quarter of 2019. It dropped by 1.5% in June, and is expected to drop another 1.5% in July because of declining orders from China. This is not yet a recession, but a technical recession, which is what happens when you have two consecutive quarters of economic contraction. The trade war between the US and China is making Chinese imports cheaper for Germany and making German exports more expensive, thus reducing the demand for German industrial products. Also, there is the fear of a no-deal Brexit now that Boris Johnson was appointed Prime Minister of the UK, and there are very low interest rates that may be creating a new financial bubble.

Joining me now to discuss the German economy in the context of the US-China trade war is Heiner Flassbeck. He’s the Director of Flassbeck-Economics, a consultancy for global macro questions. Also, he’s the former Chief of Macroeconomics and Development of the United Nations Conference on Trade and Development. Thanks for joining us again, Heiner.

HEINER FLASSBECK: Thanks for inviting me.

GREG WILPERT: Germany is known as the economic engine of Europe as I mentioned, or at the very least its industrial engine. How real do you think is the danger of recession in Germany, and would such a recession drag down the whole European Union with it?

HEINER FLASSBECK: Well, first of all, that with Germany being the engine of Europe, I have my doubts because as I’ve said many times on this program, Germany has been exploiting the other countries by exporting its way out of the crisis and exporting its way into a good recovery compared to the bad recoveries that the other European countries had. So far what we see is indeed we have a German economy that is extremely exposed to the world economy, and in particular China, you mentioned it. This is showing now in a reduction of demand from the rest of the world.

But, but, the big but is that also from Europe, demand from Europe at this moment of time is shrinking more than demand from the rest of the world. So what we have is [foreign language 00:02:32], European [foreign language 00:02:33], a weakness of Europe for a really long time because Europe is struggling with this super competitive Germany and is pushing down wages. We have with this low wage increases in the last 10 years, more or less, we have very weak domestic demand. That is why any reduction from export, any shock from the export side, is immediately driving or getting the European economy off track.

GREG WILPERT: When you mentioned the more general European context of the German economy, it sounds like you’re discounting perhaps the role that the US-China trade war and the devaluation of the Chinese yuan are playing in the economic problems that Germany is currently facing. Is that correct, or what role exactly do you see the trade war playing for Germany and more generally for the global economy?

HEINER FLASSBECK: Well, everybody says the trade war is the main thing. I have my doubts it is the main thing. It’s surely adding to the uncertainty around the world, including the Chinese small depreciation that happened a couple of days ago when the US called it a “currency manipulator,” which is a big word for a little thing. But overall the Chinese position, the competitive position, hasn’t changed very much. If you look at the real effective exchange rate, and that is the only reliable measure for competitiveness. That is, the competitiveness compared to all the trading partners of the country, including the exchange rate and including the inflation differentials or unit labor cost differentials. Then you see that China is still at a very high level.

Europe on the other hand, has a very low level, and US also is on a quite high level. So the point is still, that I’ve been making also many times, that Europe is still a little undervalued. Europe is definitely more undervalued than China, and so far the focus of Mr. Trump on China and the fist-fight, his in-fight with China, is very irrational. It should focus more on Europe. Europe is the bigger thing worldwide. Although the bilateral relations – in the bilateral relation, China is more important than Europe. But for the world as a whole, and this is what really counts and not the bilateral relationships, what really counts is the global picture. There, Europe is in a dangerous situation. Then you see in addition to all this, to our dependence on exports, the German dependence on exports, we see all over Europe, except for the monetary policy – it’s quite stupid, it’s quite stupid policy reactions in particular on the fiscal side.

GREG WILPERT: Well, I want to get to that point in a moment, but first I’d like to ask you about something you just said, which is, you said that Europe is being undervalued, and that Trump ought to be focusing on Europe. I mean I want you to explain, “What do you mean by that?”

HEINER FLASSBECK: Well, Germany still has an extremely high current account surplus. The valuation, again, the real effective exchange rate of the Euro is rather low compared to many years before. So far, if there is a competitive advantage in this world that a big region has against other regions, then it’s Europe against the United States. So far the Trump complaints about the German surplus, he said, “The Germans are bad, very bad,” it’s not fully unsound. It has its justification, and indeed what we should see in Europe is a much stronger focus all over Europe on domestic demand.

Europe is as closed an economy as the United States. The overall export share is very low, below 20%. Only Germany has an export share of 50%, which is really unreasonable for such a big country. An export share at 50% is absurd. So Germany has the wrong structure, and mainly Germany has to change. But the point is, Germany is not doing trade policies. The trade policies are done in Brussels, and so Trump does not really know whom to address with his accusations. But as I said, Europe could solve its own problems and does not have to look permanently to the world market.

GREG WILPERT: Well, that’s exactly the next issue I want to turn to. Now, you recently published a series of articles on your website, Flassbeck-Economics, with the title, “The Great Paradox: Liberalism Destroys the Market Economy.” Now we don’t have enough time to delve into all of your argument in detail here-

HEINER FLASSBECK: Unfortunately.

GREG WILPERT: … but I’d like to get the general gist of it and look at how it relates to the economic situation today. That is, your articles look at how liberalism, or what would some would call “neoliberalism”, contributes to the continuous slowing economic growth ever since the 1970s. Now, how does economic liberalism relate to Germany’s and Europe’s economic problems?

HEINER FLASSBECK: Well, to make a long story rather short, the point is rather trivial. The point is that under the neoliberal hegemony in the last 30 years, it began in the 70s. More than 30 years, it’s close to 50 years now, the market economy turned into something quite strange. Namely, a system where the company sector does not play the role that it should play in a market economy, which is to be the main investor and to be the main debtor. This combination to be investor and debtor is long gone. In most of our economies, including the United States, it’s gone for 15 years or 20 years even, so that we are faced with the situation that people save.

People still continue to save. Private households are saving money, but also the company sector is saving money. So in this situation, it is impossible that a market economy can function because the only way out then is you need someone who takes on debt. You need someone who invests these savings or the money that is needed to compensate for the demand restriction, demand fall that comes from the savings, so who’s going to do that? The only guy around for the whole world is obviously the government. The only guy around for big regions like the United States and Europe is the government. Only the Germans have found a nice solution with their export surpluses, so they ask other countries to be the debtor so that they are out of the trouble.

But that is obviously not a solution for the world and it’s not a solution for Europe. So Europe has to accept that fiscal policy must play a much stronger role, as it does in the United States. United States claims to be the best market economy in the world, but who is the demander so to say, the investor of last resort? It’s the government. Look at your figures. The figures are dramatic. In European terms they’re dramatic. They’re not dramatic in objective economic terms, but in European terms they are dramatic. More than 4% current deficit. More than 1,000 billion in the next fiscal year. Close to 800 billion last fiscal year. So in Europe everybody would say, “This economy is going to collapse. The government is bankrupt and we need other countries to finance the government.”

So far, the Europeans have to learn the lesson that neoliberalism has taken out the dynamics of investment, of private investment in the market economy, and there’s only one institution that can replace private investment and private dynamics. That is the government. That is the transformation of the whole economy that has taken place in the last 50 years. The only region in the world that is not accepting it are the Europeans. And this is the big failure and this is a big problem.

GREG WILPERT: Well, I think that’s a very interesting and very important point. Although I would also perhaps point out that it’s important to keep in mind that the US deficit is to a large extent also based on a fairly low taxation rate, and extremely high spending rate on military expenditures. Half of the budget going towards the military, which is obviously not necessarily the solution, but which some people have called “Military Keynesianism.” Wouldn’t you agree ?

HEINER FLASSBECK: That is right. It’s not a solution in the long term, but in the short term the market doesn’t care where the demand comes from. Does it come from the government military sector, or the government private sector, the government investment sector? Nobody cares. That is the simple point. To solve the problems of the moment, you need the demand. And where the demand is coming from is not the first question. It’s only the second or third question. In Europe there is no demand at all, and that is the biggest problem that you can have. I do not defend Trump’s tax reduction. That was stupid. In a situation where when the company sector is a net saver, to reduce the taxes for the company sector is really absurd. But the United States showed that it’s nevertheless possible, despite all these errors, despite these foolish policies, it is possible to have an ongoing recovery, and the unemployment rate is low. There is no doubt about it.

GREG WILPERT: Well, we’re going to leave it there for now, but I hope we will have you back on very soon.

HEINER FLASSBECK: Sure.

GREG WILPERT: I was speaking to Heiner Flassbeck, Director of Flassbeck-Economics. Thanks again, Heiner, for having joined us today.

HEINER FLASSBECK: Bye-bye. Thanks for having me.

GREG WILPERT: And thank you for joining The Real News Network.

New Jobs in the military? (US role model? again? hope not)

“The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers”

“Japan proposed its model for the former communist countries, and many began looking to it and to South Korea as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive.

Engdahl wrote:”

“The Tiger economies were a major embarrassment to the IMF free-market model.

Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free-market agenda.

So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course.

In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy – an Asian form of benevolent paternalism.”

source:

Neoliberalism Has Met Its Match in China

“US decision to impose added tariffs on more than $300 billion of China trade, and the US Treasury declaring China a “currency manipulator”, global financial markets have reacted with sharp selling.” (source)

Comment:

Of course – China is not a democracy.

Chinese people – but also Europeans – do not enjoy the (sometimes insane) freedoms (of buying shotguns at supermarkets) that US people have (if they would have the money… but private banks can not fund limitless US consumerism).

But yes – less freedom in China – more state control and surveillance, but that is an “official” fact.

An “unofficial” fact is: that western democracies simply do not care about their own laws and engage in mass surveillance unlawfully.

Western politicians make decisions not only against the will of the public – but also to the damage of the public – the average Joe and Jill – in order to exploit exploit and enrich a small elite that can afford lobbyists (the already rich and big companies).

Both “systems” try to manipulate their citizens with propaganda and state created terrorist attacks.

Both systems fail to keep speculation bubbles (housing bubbles) under control.

Housing is essential for people to survive and if they have to spend more than 30% on rent – it is not only unfair and exploitation, it is creating housing bubbles – one that the world has seen burst in 2008/2009 subprime crisis.

Nobody wants to see this happening again but too little is done by politics to prevent it.

In London 40.000 flats and houses remain empty, they are simply for parking the money of the super rich.

In Germany real estate speculations have caused people to leave their home towns and “wander around” because they can not afford the housing anymore in Munich.

Wages are rising in China – not so much in the Western Worlds.

the heart of the issue is a fundamental good that has been driving social and economic inequality for centuries: real estate. https://www.project-syndicate.org/commentary/inequality-global-city-real-estate-by-harold-james-2019-08
the heart of the issue is a fundamental good that has been driving social and economic inequality for centuries: real estate. https://www.project-syndicate.org/commentary/inequality-global-city-real-estate-by-harold-james-2019-08

Bank of North Dakota:

But to have a public bank (at least one) is a good idea.

There would be no Solar Panels in Germany without a public bank.

So, why does “The West” not want to learn and stay a stubborn kid forever?

always ask: Cui bono? = Who profits?

Who profits from:

  • “free market” in all it’s meaning
    • complete dependence on private Banks for private loans
    • abolishment of all (trade) barriers (United States of Europe)
    • companies competing to the death, going bankrupt (to buy them cheap)?

One answer: The super rich – that own the large companies, the monopolists.

https://www.statista.com/statistics/263264/top-companies-in-the-world-by-market-value/
https://www.statista.com/statistics/263264/top-companies-in-the-world-by-market-value/

http://www.williamengdahl.com/

This System is madness.

The short story of our debt-money system aka governmental system (because the politicians are largely “market driven” depend on money from banks, insurance companies, investors):

Let us assume there is only one private Bank.

Let us assume there are only 2 companies in the world that produce the same e.g. tables.

The Bank gives everyone a loan of 50Units with a term of 10 years and an interest rate of 5%.

The money to pay the interest is never generated.

This means company A can only pay back the credit if company A takes away away money from company B. (be cheaper, faster, better, competition)

This creates competition and unemployment when company B goes bankrupt.

Company A might now even have a MONOPOLY on tables, and the prices probably explode.

Creates a bubble for table prices to the point that nobody can afford tables – then the bubble bursts.

Do you think that’s funny?

Not me.

The Bank always wins, because its stake was never high.

You can say it lost 50Units because company B could not pay back the loan and went bankcrupt.

But that is not the case, the private Bank did not borrow the 100% from someone, it had only to borrow 10%/10Units of “real” Central Bank cash money at 0-2% had to borrow.

So 10Units the bank had to borrow 90Units it created itself.

So at the end of the 10 year loan, company B is bankrupt, company A has a monopoly and the bank get’s 63.75Units back – that people worked hard for – what gives the current actual fiat money it’s value.

In theory – 15% unemployment seems to be just a number – in reality – people that own nothing (no house, no garden, no farm, no nothing, can not grow a feed themselves or their families if job is lost, 100% dependence for survival on debt-money) will have to become criminal – just as company A maybe used unfair or even criminal tactics to bankrupt company B (spread lies about their products) – even the super rich want to roam the streets of this planet safe – without constant fear of being kidnapped or robbed. Now let me ask this more productive question:

How would a monetary system look like that is:

  • fostering stability, peace and security
  • fostering creativity and innovation that benefit all of mankind
  • beneficial for a more sustainable survival of mankind aka “everybody” on this beautiful planet

a positive story:

(need more of those)

one fine example what can be done: A city in Brazil was full with plastic waste, the city decided to do something about this (also bad for tourism if your beaches look like trash dumps).

So they accepted a bag full of litter and plastic waste as payment in exchange for one week of free bus and/or train riding. (obviously the bus/train system was still owned by the city and not some private company).

After a few months fishermen even collected trash from the ocean in order to use it as bus tickets.

The city became clean within a few years – the oceans – well that will take a bit longer.

A sentence from Bernard Lietaer, that i not quiet understand:

“money needs to be scarcer than it’s usefulness”

How Currencies Can Be Designed to Promote Environmental and Social Ends

In German:

Der Wahnsinn hat System.

Die kleine Geschichte unseres Schuld-Geld-Systems aka Regierungssystems, weil die Politik maßgeblich sich nach “den Märkten” (Banken, Versicherungen, Investoren) richtet:

Nehmen wir an, es gäbe auf der Welt nur 2 Firmen die das gleiche produzieren z.B Tische.

Die Bank gibt jedem einen Kredit von 50€ mit einer Laufzeit von 10 Jahren und einem Zins von 5%.

Die Zinsen werden nicht erzeugt.

D.h. man kann den Kredit nur zurück zahlen, wenn Firma A Firma B etwas weg nimmt.

So entsteht Konkurrenz und Arbeitslosigkeit, wenn Firma B dann pleite geht.

Firma A hat dann ein MONOPOL auf Tische und kann die Preise ordentlich explodieren lassen. (eine Preis-Blase bildet sich und gefährdet die Stabilität des ganzen Systems)

Findest Du das lustig?

Ich nicht.

Die Bank gewinnt dabei immer, denn ihr Einsatz war nie hoch, da Sie 90% des verliehenen (Giral/Buch)Geldes “aus dem Hut” bzw. Computer gezaubert hat und sich nur 10% “echtes” (Bar)Geld von der EZB für 0% dafür leihen musste.

Ein Satz den ich leider (bisher) nicht verstehe:

“Geld muss immer knapper sein wie sein Nutzen. (!?)”

Vielleicht kann jemand erklären, was das bedeutet.

backup:

How Currencies Can Be Designed to Promote Environmental and Social Ends

Bernard Lietaer is an expert in the design and implementation of currency systems. He has worked in this field for more than 30 years in various roles including central banker in Belgium, fund manager, university professor, and consultant to governments, multinational corporations, and community organizations. His latest book on monetary innovation is People Money: The Promise of Regional Currencies and Money and Sustainability (2012). The monetary system is implicated in many of today’s social and environmental problems. I had a chance to ask Bernard how a better system can be designed.

Allen White: You are well known as a monetary reformer. What led you to study and then rethink the money system?

Bernard Lietaer: As a graduate student at MIT in the late 1960s, I was interested in the application of systems theory to international finance. My thesis, published by the MIT Press in 1970, described how a corporation operating in many countries could optimize currency management. It, among other things, explained how a corporation could best address “floating exchange,” an arrangement, at that time limited to a few currencies in Latin America, in which a currency’s value fluctuates based on supply and demand in the market.

The year after the publication of my thesis, President Nixon took the United States off the gold standard, initiating a global shift to floating exchange that was once a rarity. My research became extremely valuable, and a major U.S. bank negotiated the exclusive rights to my methodology.

I was in management consulting at the time, and my contract with the bank required that I work in a different field for at least five years so that I wouldn’t share my methodology with the bank’s competitors. I took a job advising the largest mining company in Peru and then, after it was nationalized, the Peruvian government itself, where I developed computer models to maximize hard currency earnings. From there, I went back to the Ivory Tower as a professor of international finance, then into the world of central banking via the Central Bank of Belgium. At the Bank, I was tasked with designing the ECU (European Currency Unit), the predecessor to the Euro. Later, after serving as the president of Belgium’s Electronic Payment System, I left government and worked as a currency trader.

Each step in my journey forced me to think about money in a different way: to shift from the perspective of a multinational corporation to that of a developing country to that of an academic to that of a central bank to that of a currency trader. This diversity of perspectives opened my eyes to the merits and flaws of different monetary systems.

AW: How would you describe the prevailing monetary system today?

BL: Today’s monetary system is characterized by a monopoly of scarcity—and debt-based national fiat currencies. Let’s break that down.

In the modern economy, money is inextricably linked to taxation. The government defines money by choosing what it will accept as payment for taxes, and then citizens must work, trade or invest to obtain that money to pay such taxes. Since the abandonment of the gold standard, national currencies have been “fiat” money. “Fiat” here refers to the first words that God spoke in the Latin version of Genesis: fiat lux (“let light be”). In other words, fiat money gains its value simply by virtue of government decree.

Money comes into existence when banks lend. When a bank provides you with a loan or a mortgage, it creates the principal, which you spend, allowing it to circulate in the economy. The bank expects you to pay back not only this principal, but also a certain amount of interest to cover the risk involved in providing the loan. However, the bank does not create any new money for this interest. Instead, it, in effect, sends you into the world to battle everyone else to secure the money required. “Bank-debt money needs to be scarcer than its usefulness” is a quote from monetary economics textbooks. By nature of its creation process, bank-debt money generates scarcity and competition among its users.

I do not think that greed is necessarily ingrained in human nature: it may be cultivated in part by this system of scarcity and competition. But it does not have to be this way. Since money and monetary systems are ultimately social constructs, we can design a monetary system better aligned with our goals on the national and global level.

AW: You have faulted the current monetary system for contributing to growing inequality, environmental degradation, and the erosion of social capital. How does it do so?  

BL: Money is not a neutral and passive medium of exchange, as is generally assumed. It exerts a major influence on human behavior. We design the monetary system, and it, in turn, shapes us, our behavior, and our social relations. The current design incentivizes behaviors antithetical to social and environmental well-being.

For example, our system of debt-based money creates pressure for economic growth because borrowers must secure additional money to pay back the interest on their debt. The payment of interest with debt-based money, in turn, leads to a compounding of interest, which tends to foster exponential growth. However, such exponential growth in economic output is impossible in a world of finite natural resources. Moreover, bank-debt money can be described as an extraction process whose net effect is that money flows to those already at the top, thereby increasing wealth disparities.

Social capital depends on trust, solidarity, and cooperation. These sensibilities are built through voluntary acts of sharing and generosity, such as helping a neighbor or mentoring a student. The monetization of all human transactions promotes the selfish, non-collaborative behaviors that erode community cohesion and, thereby, social capital.

AW: Many of our readers are familiar with the problems caused by monoculture in agriculture. Is monoculture also a problem when it comes to money?

BL: Yes, and some of the deepest thinkers in economics, dissatisfied with the failures of neoclassical orthodoxy, have looked to natural systems for new ideas and solutions. Biologists and complexity experts have shown that the long-term sustainability of a complex flow of networks depends on having the right balance between efficiency and resilience. Efficiency refers to the network’s ability to process a volume of flow per unit of time in an organized fashion. Resilience refers to the network’s ability to cope with change while preserving its integrity. Both of these depend on the same two structural variables—diversity and interconnectivity—but in opposite ways. Efficiency is maximized by reducing diversity and interconnectivity, and resilience is maximized by increasing them. The current economic system puts too much emphasis on efficiency at the expense of resilience. The result is a focus on—some would say obsession with—GDP growth that tallies all economic transactions equally even when they are socially and/or environmentally harmful.

As is the case in agriculture, a monoculture in the money system increases risk. We’ve seen that play out in the crises of the last few decades. Since 1970, there have been 145 banking crises, 76 sovereign debt crises, and 208 monetary crashes around the globe. And if the current system continues to prevail, we’ll see many more.

AW: You have argued for breaking up this monetary monoculture through the use of complementary currencies. How would that work?

BL: Let us start by clarifying what money is: an agreement, within a community, to use some standardized item as a medium of exchange. There is no need to use just one medium. Complementary cooperative currencies can exist alongside our dominant competitive and national currency systems. These currencies can be managed by members of a community, a nongovernmental organization, or business network with the aim of linking unused resources with unmet needs.

A commercial example familiar to most people is frequent flyer miles: they connect the unmet need for airlines of customers’ loyalty with an unused resource, namely, an empty seat on a flight. Whenever there is an unmet need in an economy and an unused resource—and there are many—the two can be linked with a currency. Today, there are approximately 4,000 mature cooperative currencies in operation around the world.

These currencies need not be interest-bearing; indeed, some of them incorporate “demurrage,” a time-related charge for holding onto this currency, which creates an incentive to keep it in circulation. Currencies with demurrage do not contribute to the concentration of wealth and tend to foster a greater sense of community.

AW: Have you witnessed the success of complementary currencies on the ground? If so, what are some examples?

BL: The most frequently used cooperative currency system in the world today is the Local Exchange Trading System (LETS), which was invented in the town of Courtney outside of Vancouver in the early 1980s. After a military base in the town moved, the formerly middle-class town experienced an economic slump, with unemployment rising to 40 percent. But the town still had many unmet needs and a large unused resource in the form of a skilled labor force willing to work. What was missing was a link between the two: that’s what LETS provided. And it has proven to be a great success, encouraging people to use skills they might not have considered valuable (such as cooking, teaching English, or web designing) and giving access to services to people who in the past may not have been able to afford them.

Time dollars provide another example. This system was created by Edgar Cahn, a former speechwriter and counsel to Robert F. Kennedy. The time dollar is equivalent to one hour of service and can be spent on services within a given community, where everyone’s time has equal value. Today, approximately 300 TimeBanks operate in the US and another 300 in the UK, and time banking has spread to almost three dozen additional countries worldwide.

Or consider the Chiemgauer system in Bavaria. Regional nonprofit organizations that wish to participate purchase Chiemgauers for their members at a rate of 100 Chiemgauers for 97 euros. The Chiemgauers can then be used to purchase goods and services in participating stores. As the Chiemgauers are a demurrage currency, people are incentivized to keep them in circulation, rather than hoarding them. Currently, there are 600 participating businesses, and more than 500,000 Chiemgauers in circulation.

Torekes, a currency I helped design, illustrate how complementary currencies can foster greater community. Torekes are in use in Rabot, an immigrant district in the Belgian city of Ghent and the poorest community in the region. We asked residents what they wanted and found that those living in the high-rises dominating the district wanted access to a few square yards of land for gardening. The city had land sitting derelict after a factory moved. An unmet need and an unused resource provided an opportunity for a currency to link them. The city decided to rent out the land in small plots, taking payment in Torekes (Flemish for “little towers”), which people could earn by participating in various urban improvements and beautification activities. The city also arranged for local shops to accept Torekes for specific goods that it wanted to encourage people to buy, such as energy-efficient light bulbs or fresh, seasonal vegetables. The stores could keep the Torekes in circulation or get reimbursed in euros.

AW: How scalable are such complementary currencies? Do they offer a real alternative to the current system?

BL: As I noted before, whenever and wherever there are unmet needs and unused resources, a currency can be designed to link them. Experimentation will be necessary, and when approaching experiments of any kind, and especially social experiments like these, we must be ready to accept failure. Over time, however, the most successful ones will attract the most attention and be replicated. As in any disruptive social innovation, experimentation is essential because we still have much to learn, such as what governance structures are most appropriate for different currency systems. The proliferation of complementary currencies is a testament to human creativity, and I believe they are essential to revamping our socially detrimental monetary system.

AW: If the negative consequences of our monetary system are so clear, why haven’t they been recognized and addressed earlier?

BL: We suffer from a three-layered collective “blind spot” with regard to our money system. The first layer arises from the hegemony of the idea of a single currency. Many people believe that societies have always created, and indeed must create, a monopoly for a single, centrally issued currency. Monopoly has been the rule in many times and places, but there have been exceptions, and such alternative systems fostered economic stability, equitable prosperity, and a longer-term perspective.

The second layer is an indirect result of the ideological warfare between capitalism and communism in the twentieth century. Although the differences between these two systems have been studied ad nauseam, their similarities have not. And among them is a shared belief in a single national currency.

Our institutional framework is the source of the third layer. From the eighteenth century onwards, governance of the money system has been institutionalized through the creation of central banks, which have acted as enforcers of a single currency monopoly in each country.

Multiple forces conspire to keep all three of these blind spots in place. For instance, challenging the hegemony of the monopoly currency puts academics at risk of exclusion from the top conferences and top peer-reviewed economics journals because the gatekeepers in both cases are wedded to the current paradigm. As usual, the costs of nonconformity are high, and the forces of inertia are powerful.

An even deeper obstacle lies in our collective psyche. We are motivated by both greed and a fear of scarcity, both of which lead to an obsessive focus on money, making the issue emotionally charged and discussion difficult.

AW: What role can information technology play in facilitating the use of multiple currencies?

BL: Over the centuries, many different forms of “money” have been invented and used. Today, those in use include bank notes, bonds, and corporate equity as well as gift cards, loyalty points, and community currencies. Digital currencies are the latest addition, with Bitcoin, the first decentralized digital currency, arriving on the monetary stage in 2009. Bitcoin has been followed by a wave of other digital currencies and digital assets that have raised capital while avoiding the high costs of the usual sale of stock in public markets.

Currently, when changing one type of asset into another, one must rely on an intermediary who profits by matching parties with a coincidence of needs. This reliance on matching creates significant barriers, making it nearly impossible for small-scale currencies to be valued against and thus traded for other currencies at market-determined exchange rates. One breakthrough to address this age-old problem is the Bancor protocol. It is named after the proposal made by John Maynard Keynes after World War II for a supranational reserve currency that is nobody’s national currency. Utilizing information technology innovations, particularly “blockchains” that provide transparent, decentralized records of transactions, the Bancor protocol provides an effective way to provide convertibility and liquidity for small-scale complementary currencies without needing a counterparty or an intermediary.

AW: What role can monetary reform play in achieving a Great Transition?

BL: The current monetary system lies at the root of so many contemporary problems. However, because our system of money is a social construct, we can—and indeed, must—change it. A new monetary ecology that combines an array of currencies at various levels—local, regional, national, multinational, and global—can be at the heart of a Great Transition. Such an approach would open up a whole new range of alternatives that can promote the well-being and resilience of both human societies and the environment.

The complementary currencies already in operation today provide glimmers of hope as well as templates for others to adapt according to the needs of their specific communities. By rethinking money and carrying out experiments to connect unused resources and unmet needs, we can help usher in a new era of sustainable abundance.

src: https://www.alternet.org/2017/11/how-currencies-can-be-designed-promote-environmental-and-social-ends/