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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?
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Four Simple Questions
• How is the money monopoly enforced?
By law?
By taxes?
• What is money?
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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
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Plan
• Why is our money not neutral?
• Solution: complementary currencies?
• Some Examples
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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’
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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
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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
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High Diversity
High Interconnectivity
www.egs.mmu.ac.uk
Low Diversity (Monoculture)
Low Interconnectivity
My.Opera.com
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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…
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Resilience
Efficiency
Balance in Natural Networks
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(In)Balance in Our Financial Network
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Plan
• Why is our money not neutral?
• Solution: complementary currencies?
• Some Examples
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Number of Social Purpose
Complementary Currencies
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“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”
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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
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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…
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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
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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?
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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)
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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.
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Our international monetary system is in…
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• 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
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Conclusion
• Rethinking the money system
is a necessary condition for
sustainability
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•www.lietaer.com
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Follow Up
• www.lietaer.com
• Articles in 4 different peer-reviewed
journals
• => see www.lietaer.com/research