There is an enormous amount of pain and suffering of millions of humans and other sentient fellow creatures on account of the synchronous crises in the global financial system and in the change of the climate. This unnecessary suffering will continue to get worse in an international economic system that still enriches the few, impoverishes the many and imperils the planet.
The first phase in resolving these crises is to recognize them for what they are and what they do. While the consequences of these crises have become clear from the thousands of reports that deal with these crises, what the nature of these crises is has not become clear, particularly its causation in all its complexity. So, the second phase is an unbiased analysis in which analysts make explicit their values, perspectives, biases. The third phase builds on the first two: developing policies and plan of action based upon the best integrated thinking humanity has to offer. The final phase is to work for its implementation. It takes courage to take a position rather than be an undecided moderate who can go either way or no way.
This series of three articles presents a solution that does not reform, but transforms the present world order. It is a “global New Deal” that is based upon the values of equity and sustainability, the only values that can lead to stability in the monetary, financial, economic systems.
It is the International Institute of Monetary Transformation’s position that this needed monetary and financial transformation cannot take place within the present structure of the IMF, World Bank, WTO, and the lesser known Bank of International Settlements (BIS). Though they are trying to assert themselves and come up with reformist proposals, they will have to move over for a lasting equitable, sustainable, and, therefore, stable monetary, financial, trading and economic system to take place.
Solving the economic and climatological crises simultaneously, not sequentially
In doing the research for my forthcoming book TIMU: The Transformative Approach to Monetarily Solve the Economic Crisis by Solving the Climate Crisis I have observed that many people of all kinds of backgrounds are very hesitant to think that both the economic and climatological crises should be tackled simultaneously. Both crises are of such magnitude that they can only be tackled sequentially is the reasoning.
I was most encouraged a couple of days ago when two of the world’s most outstanding economists, Joseph Stiglitz and Nicholas Stern, published the following statement when they were meeting in Washington D.C. on March 2. They stated: “We face two crises: a deep global financial crisis, caused by inadequate management of risk in the financial sector; and an even deeper climate crisis, the effects of which may seem more distant but will be determined by the actions we take now. The scale of risk from climate change is altogether of a different and greater magnitude, as are the consequences of mismanaging or ignoring it.
The US, in particular, has a window of opportunity to act on the financial crisis and, at the same time, lay the foundations for a new wave of growth based on the technologies for a low-carbon economy. President Barack Obama, in his speech to Congress and budget last week, explained that we need to address both of these challenges, and outlined a broad approach. US leadership could generate a powerful response from across the world, making possible an agreement at the United Nations climate change conference in Copenhagen in December on a scale necessary to manage the risks involved.”
Given that the two economists believe the “scale of risk from climate change is altogether of a different and greater magnitude” than the risk of the economic meltdown it stands to reason that we look at solving the climate crisis first if we can and then consider the connections with the economic crisis. It is the institutional nexus of binding the resolution of both crises together that is being proposed in the Terra Solution and its monetary architecture.
Thus, among climate community activists and scholars, discussing the pros and cons of arbon reduction methodologies of cap&trade and the carbon tax I have been trying to introduce the third option: the Terra international reserve currency which is based on carbon emission permits which form part of a nation’s balance of payments. Like the other two methods the Terra carbon reduction option also reduces carbon emissions. However, the Terra option connects with the economic crisis because the Terra international reserve currency represents real money that will flow from ecological debtor countries in the global North to ecological creditor countries in the global South. It would institutionally guarantee funding for development and pay for mitigation and adjustment costs of the climate crisis in the global South.
When the two economists above pointed to the inadequate (should it not be grievous?) mismanagement of the banking sector as the main cause of the economic crisis, they and almost everyone else fail to mention that in almost all countries the banking system is privately owned. Thus, in the USA, the Federal Reserve Bank with its 12 regional banks is owned by private banks which have managed, since 1913, to be legally in the business of money creation which is the duty, right and responsibility of the public sector. They create money by the fractional reserve system which can multiply a deposit of $1000 ten times. In the discussions about the banking crisis in the USA, Europe and elsewhere (not in China, India) bailouts and even temporary nationalization are seen as solutions.
However, what is needed is a reversal of privately-owned banking systems to publicly owned banking systems, including central banks such as the US Federal Reserve Bank. A most important book in this regard is EH Brown’s The Web of Debt. The Shocking Truth About Our Money System and How We Can Break Free. Benjamin Franklin, President Lincoln, political parties in the 1890s and even President Kennedy for some time managed to have the public sector implementing its constitutional right of coinage.
Frans C. Verhagen, M.Div., M.I.A., Ph.D., sustainability sociologist International Institute of Monetary Transformation. www.timun.net New York City, March 2009