"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Monetary Policy’

Put the Environment At The Center Of The Global Economy: An Argument For The Eco-Currency

In Uncategorized on May 21, 2013 at 4:50 pm

Oldspeak: “The solution to both the problem of currency and of climate change is obvious: we must hardwire the health of the ecosystem directly to the standard measurements of economic health so that the state of the environment is immediately visible in all economic transactions. Global finance, trade and investment must all be conducted within a system that makes the preservation of the climate, rather than profit, the highest priority. One possible approach is the introduction of a global “eco-currency.” The international community would establish an international currency, an “eco-currency,” whose value is linked directly to the state of the climate (both globally and locally) and that currency would serve either as a universal currency within which international transactions take place, or it could be a factor that significantly impacts all the global currencies.” -Emanuel Pastreich. YES! Brilliant! Tie our monetary measures of health to the health of our planet! Discard extractive, profit driven, imaginary computer generated “market-based” economic systems and replace them with naturally regenerative, resource and ecosystem based economic systems.  An ecosystem based society… Focusing on carbon emissions only allow focus to be placed on a single aspect of the ecosystem. While our bodies,  oceans, streams, lands, fellow lifeforms and food are poisoned.” This system requires consideration of the ecosystem as a whole. Species extinction would have to be accounted for and avoided… Waste would have to be minimally or non-toxic, bio-degradable and recyclable. Extraction would be highly regulated done in a manner that would require replenishment or conservation. All kinds of wonderful side-effects would arise. Reduced pollution, healthier food, cleaner water, reduced poverty, reduced inequality, greater bio-diversity, etc, etc, etc, the possibilities are endless! Barefoot Economics par excellence!

By Emanuel Pastreich @ Truthout:

The environmental challenges we face today, from spreading deserts to rising oceans, compel us to reconsider the conventional concepts of growth and recognize that they cannot easily be reconciled with the dangerous implications of runaway consumption and unlimited development.

Above all, we must get away from a speculative economy born of an irrational dependence on finance, which has becoming increasingly unstable as digital technology accelerates and financial transactions take place without any objective review. We must return to a stable and long-term economy. In part, that process concerns the restoration of regulation on the banking system, but the change must also involve the very conception of finance and banking. Finance must be aimed at stable, long-term projects which have relevance for ordinary people.

Nothing could possibly be more helpful in this process than large-scale projects to restore the environment and address the damage done to the climate by human activity. These projects are absolutely necessary for human survival and they will take decades, if not centuries, to complete. By grounding the economy in adaptation and mitigation, we can return to a predictable system in which green bonds funding 30-50 year projects directly related to our well-being are dominant and we can escape from the flighty digital economy of thousands-per-second transactions.

In addition to the development of a “green bonds” system for funding long-term meaningful projects to address the climate crisis, we should also consider the role of currency itself. We are engaged in a dangerous race to devalue currency around the world in the expectation of increasing advantage in trade. This activity is profoundly destabilizing for our economy and at a higher level also causes chaos in the process by which we assign value in general.

The solution to both the problem of currency and of climate change is obvious: we must hardwire the health of the ecosystem directly to the standard measurements of economic health so that the state of the environment is immediately visible in all economic transactions. Global finance, trade and investment must all be conducted within a system that makes the preservation of the climate, rather than profit, the highest priority.

One possible approach is the introduction of a global “eco-currency.” The international community would establish an international currency, an “eco-currency,” whose value is linked directly to the state of the climate (both globally and locally) and that currency would serve either as a universal currency within which international transactions take place, or it could be a factor that significantly impacts all the global currencies.

Such an eco-currency would require a calculation of the state of the environment on which its value would be based. First we need to come up with a system for evaluating the state of the environment in real-time which could be converted into a set of figures for the calculation of the total state of the global and the local ecosystems. That set of figures would then be the basis for the eco-currency’s value. Such a system would be complex and far from perfect, but it would be a massive improvement over the current factors employed in calculating gross domestic product which are limited to consumption and production and exclude the state of the environment entirely.

There exist indices such as Yale’s Environmental Performance Index that do part of that process, but so far, there is no total agreed on standard for evaluating the state of the total environment that could be used to periodically measure the state of the environment in a manner that could be employed as a universal reference. Only then could the amount of, or the value of, the eco-currency possessed by a nation reflect an objective evaluation of the health of the climate.

If the eco-currency were to serve as one of several factors impacting all global currencies, it might serve as an instrument akin to the SDR (special drawing rights) system currently employed by the International Monetary Fund. According to the IMF website, member [nations] with sufficiently strong external positions are designated by the Fund to buy SDR s with freely usable currencies up to certain amounts from members with weak external positions. In the case of the eco-currency, that strong external position could be redefined so as to consist primarily, or entirely, of environmental criterion.

The eco currency could alternatively serve as a gold standard for all nations of the world, permitting each nation to increase its money supply in direct proportion to the environmental credits that it has accumulated through wise and effective policies by reducing emissions and preserving water and soil.

After all, in that the previous gold standard was based on a mineral that was exceptionally rare and valuable, so it could be a logical extension of that concept to argue that a healthy ecosystem is the most valuable commodity available. The ecosystem is far more valuable to human society than is gold. Each nation would continue to have sovereignty with regards to its own currency, but the calculation of each currency’s exchange rate would take into account the environmental status of the country and its share of a calculated total of environmental credits for the entire world.

Whether it serves as a universal currency, or as a factor impacting all hard currencies, the total amount eco-currency available would be calculated as equal to a global sum of the total value of the ecosystem. Those credits would be assigned to a country based on an evaluation of how good a job that nation does reducing harmful emissions, preserving undeveloped lands, caring for its water supplies and otherwise implementing policies that have a positive effect on the environment.

The serious problems faced by the European emissions trading system suggest that we need to move bravely to a new approach to putting the environment itself, and not merely carbon emissions, at the center of our calculations of the economy. An international currency program based on environmental credits as part of a total biosphere would make the environmental crisis visible in the financial world. The eco-currency could be the first step towards forcing those making fiscal and developmental policy at the national and international level to engage in a serious debate on the implications of their policies for the climate. No longer would it be possible to think separately about monetary policy and environmental policy; the two would be effectively yoked together.

 

 

World’s Faith in “Free Market” Capitalism, Hard Work, Eroding. As Global Financial Crisis Continues, Pervasive Gloom About World Economy: Survey

In Uncategorized on July 13, 2012 at 3:35 pm

Oldspeak:”The world is getting wise to the hustle that is Free Market, casino capitalism. Money is being pumped into military spending, “Too Big To Fail” Banks and other multinational corporations.  Everyone else gets “Austerity Measures” Billions of  ordinary people work soul crushing jobs for slave wages their whole lives to barely survive.  Something has to change. This monetary system is unsustainable and breeds corruption, greed, and economic violence.”

By Common Dreams:

The financial crisis that has bred unemployment, austerity, and economic pain across the global for nearly fives years is also battering the reputation of the system many believe to be its main cause: “free market” capitalism.

According to a new global poll by Pew Research, only half or fewer — in 11 of 21 nations surveyed — now agree with the statement that people are better off in a “free market” economy than in some other kind.

In nine of the 16 countries for which there is trend data since 2007, before the financial crisis began, support for capitalism is down, with the greatest declines in Italy (down 23 percentage points) and Spain (down 20 points).

Support for capitalism is greatest in Brazil, China, Germany and the U.S, says the report. The biggest skeptics of the free market are in Mexico and Japan.

The survey found only four countries in which a majority of people were happy with and optimistic about the economic situation: China (83 percent), Germany (73 percent), Brazil (65 percent) and Turkey (57 percent). The Chinese are a particular exception to most of the questioning on economic optimism with Pew observing that, overall, the people of China — which runs a single party, state-controlled economy — “have been positive about their economy for the past decade.”

The survey also showed that the prolonged global economic slump has depressed the public mood about their national economies. In only four of 21 countries surveyed does a majority say their economy is doing well.

Anger at government was shared in most countries, but banks and financial institutions were frequently – in Spain (78%), France (74%) and Germany (74%) – seen as the culprit behind the poor performance of national economies. And in two instances – France and Spain – significantly more of the public blamed the banks than blamed the government.

Read the full poll results here.

IMF Advisor: Global Financial Meltdown in 2 – 3 Weeks Without Bank “Recapitalizaton”; Sovereign Debt “Stabilization”

In Uncategorized on October 10, 2011 at 1:28 pm

Oldspeak:”A little over a week after their explosive interview with trader Alessio Rastani predicting global economic collapse, BBC interviewed IMF advisor Dr. Robert Shapiro. The bailout expert said “If they can not address [the financial crisis] in a credible way, I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system…All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serious than the crisis in 2008″ - UNLESS the International Banking Cartels are “recapitalized” with hundreds of billions of Euros. Sounds eerily similar to what was said in the lead up and during the last great crash of the global financial system in 08. Only this time there’s even less money for bailouts. I’m sure they’ll get it anyway. All these gloom and doom predictions belie the basic fundamental problem, that no one wants to address. The monetary system is failing, and will keep failing if people insist on making changes around the edges. You can’t have made miniscule changes to regulations to reign in the casino capitalism and expect different results. You can’t keep throwing fiat money at the problem. This economic system is about the furthest thing from true ‘economy’, (thrifty and efficient use of material resources : frugality in expenditures; also : an instance or a means of economizing : saving) there is. It’s driven by a base & immoral concept: Greed. We would do well to implement an economy like that articulated by Dr. Manfred Max-Neef:based in five postulates and one fundamental value principle. 

One, the economy is to serve the people and not the people to serve the economy. 

Two, development is about people and not about objects. 

Three, growth is not the same as development, and development does not necessarily require growth. 

Four, no economy is possible in the absence of ecosystem services. 

Five, the economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible. 

And the fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.”

If we forgave all debt, reset to zero, retired greed as the dominant value in the world, re-worked the global economy to adhere to these postulates and values, we could focus on collectively preserving and distributing the earth’s finite resources in an equitable way. We’d all be a lot better off.

Related Video:

IMF Adviser Says We Face A Worldwide Banking Meltdown

By Tyler Durden @ Zero Hedge:

In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone’s mind: “If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008…. What we don’t know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems.”

But no, Morgan Stanley does, or so they swear an unlimited number of times each day. And they say not to worry about anything because, you see, it is not like they have any upside in telling anyone the truth. Which is why for everyone hung up on the latest rumor of a plan about a plan about a plan spread by a newspaper whose very viability is tied in with that of the banks that pay for its advertising revenue, we have one thing to ask: “show us the actual plan please.” Because it is easy to say “recapitalize” this, and “bad bank” that. In practice, it is next to impossible. So yes, ladies and gentlemen, enjoy this brief relief rally driven by the fact that China is offline for the week and that the persistent source of overnight selling on Chinese “hard/crash landing” concerns has been gone simply due to an extended national holiday. Well, that holiday is coming to an end.

International Monatary Fund Report: Inequality Increases National Debt

In Uncategorized on September 28, 2011 at 1:49 pm

Oldspeak: “WOW. You know it’s real when the financial arm of the Corporatocracy puts out a report that runs counter to the very corprocratic policies which have created the rampant inequality and crushing debt contagion that has gripped the planet. “This month, International Monetary Fund economists demonstrated that higher income inequality in developed countries is associated with higher domestic and foreign indebtedness. Leading economists agree that rampant inequality leads to unstable economies and depressions, and makes the middle and lower classes poorer.” Shocker. Turns out, it’s not entitlement programs, public employees’ pensions, and non-military spending that drives debt. It’s inequality, poverty, and debt creation. Could this report signal dissention in the ranks? Very little discussion of this corportate media.”

By Washington’s Blog:

 

Inequality Creates Economic Instability and Widespread Poverty

Leading economists agree that rampant inequality leads to unstable economies and depressions, and makes the middle and lower classes poorer.

Inequality Increases National Debt

This month, International Monetary Fund economists demonstrated that “higher income inequality in developed countries is associated with higher domestic and foreign indebtedness”:

kumhof1 IMF: Inequality Increases National DebtWe find (see Chart 1) thatwhat unites the experiences of the main deficit countries is a steep increase in income inequality over recent decades, as measured by the share of income going to the richest 5 percent of the country’s income distribution.

This increase in inequality has contributed to a deterioration in the richest countries’ aggregate savings-investment balances, as the poor and middle class borrowed from the rich and from foreign lenders. This, along with the other factors mentioned above, can fuel current account deficits.

***

The increase in debt happens over the decades of below-trend incomes that result from the persistent shock. In an open economy, the task of financing the bottom group’s borrowing demand following a negative income shock is shared between the domestic top group and foreigners. This enables the top group to deploy more of its higher income in domestic plant and machinery investment and consumption than would be possible in a closed economy. But externally the result is a deterioration of the current account, which peaks at more than 1 percent of GDP.

In reality, increases in income inequality are often followed by political interventions to prop up the living standards of the bottom group, whose real income is stagnating. This is generally done not by directly confronting the sources of inequality, such as declines in the collective bargaining power of the bottom group or shifts in the tax burden from the top group to the bottom group, but rather by promoting policies that cut the cost of borrowing for both individuals and financial institutions (Rajan, 2010). These policies include domestic and international financial liberalization, and they put additional downward pressure on current accounts.

kumhof2 IMF: Inequality Increases National DebtAs shown in the simulations in Chart 2 (solid line), a reduction in financial intermediation spreads leads to much lower lending rates, which draw more of the top group’s resources into financial rather than real assets. Initially this allows the bottom group to maintain a much higher consumption level. But in the long run it means the top group underinvests in real assets such as plants and machinery, and so the bottom group sees lower real wages over time. At the same time, debt-to-income ratios rise more strongly, as do current account deficits.

***

If lending is liberalized without addressing the underlying income inequalities, the result would simply be an increase in indebtedness within surplus countries (between the rich and the rest of the population), rather than vis-à-vis the rest of the world. In other words, there would be a globalized rather than a regional increase in domestic indebtedness of the poor and middle class. While this would reduce cross-border financial imbalances, it would exacerbate domestic debt-to-income ratios and thus vulnerability to crises. In the long run, there is therefore simply no way to avoid addressing the income inequality problem head-on. Financial liberalization in surplus countries buys time, but at the expense of an eventually much larger debt problem.

Conservatives and Liberals Agree: Government Should Not Worsen Inequality

Conservatives tend to be much more worried about debt than liberals. Given the fact that – as shown above – runaway inequality fuels debt, conservatives should be against policies that make inequality even worse. As I noted in July:

Inequality in the United States is at insane levels. Inequality among Americas is worse than in Egypt, Tunisia or Yemen. As NPR notes, inequality is higher in the U.S. than in many banana republics in Latin America. And social mobility is lower in America than in most European countries (and see thisthis and this).

In fact, most conservatives already are against insane levels of inequality.

U.S. Debt Political Theater Diverts Attention While Americans’ Wealth Is Stolen

In Uncategorized on July 15, 2011 at 11:47 am

Oldspeak:“There is a massive transfer of wealth from the American people to the hands of a few and it’s going on right now as America’s eyes are misdirected to the political theater of these histrionic debt negotiations, threats to shut down the government, and willingness to make the most vulnerable Americans pay dearly for debts they did not create”-Dennis Kucinich

By Dennis Kucinich @ Common Dreams:

The rancorous debate over the debt belies a fundamental truth of our economy — that it is run for the few at the expense of the many, that our entire government has been turned into a machine which takes the wealth of a mass of Americans and accelerates it into the hands of the few. Let me give you some examples.

Take war. War takes the money from the American people and puts it into the hands of arms manufacturers, war profiteers, and private armies. The war in Iraq, based on lies: $3 trillion will be the cost of that war. The war in Afghanistan; based on a misreading of history; half a trillion dollars in expenses already. The war against Libya will be $1 billion by September.

Fifty percent of our discretionary spending goes for the Pentagon. A massive transfer of wealth into the hands of a few while the American people lack sufficient jobs, health care, housing, retirement security.

Our energy policies take the wealth from the American people and put it into the hands of the oil companies. We could be looking at $150 a barrel for oil in the near future.

Our environmental policy takes the wealth of the people — clean air, clean water — and puts it in the hands of the polluters. It’s a transfer of wealth, not only from the present but from future generations as our environment is ruined.

Insurance companies, what do they do? They take the wealth from the American people in terms of what they charge people for health insurance and they put it into the hands of the few.

We have to realize what this country’s economy has become. Our monetary policy, through the Federal Reserve Act of 1913, privatized the money supply, gathers the wealth, puts it in the hands of the few while the Federal Reserve can create money out of nothing, give it to banks to park at the Fed while our small businesses are starving for capital.

Mark my words — Wall Street cashes in whether we have a default or not. And the same type of thinking that created billions in bailouts for Wall Street and more than $1 trillion in giveaways by the Federal Reserve today leaves 26 million Americans either underemployed or unemployed. And nine out of ten Americans over the age of 65 are facing cuts in their Social Security in order to pay for a debt which grew from tax cuts for the rich and for endless wars.

There is a massive transfer of wealth from the American people to the hands of a few and it’s going on right now as America’s eyes are misdirected to the political theater of these histrionic debt negotiations, threats to shut down the government, and willingness to make the most Americans pay dearly for debts they did not create.

These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system.

Dennis Kucinich is US Congressman from Ohio and a former presidential candidate in the United States.
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