Money and Sustainability: The Missing Link

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    Money and Sustainability: The Missing Link

    Executive Summary

    People concerned with sustainability in general ? with issues like climate change,
    environmental degradation, food and water shortages, population growth and
    energy use ? tend not to worry about the money system. Nor do they tend to look
    for solutions that involve monetary innovations. Even those economists who are
    also concerned about sustainability in principle are seldom aware that our money
    system systematically encourages unsustainable behaviour patterns that may end up
    threatening human survival on this planet. In fact, this Report shows that the current
    money system is both a crucial part of the overall sustainability ?problem? and a vital
    part of any solution. It makes clear that awareness of this ?Missing Link? is an absolute
    imperative for economists, environmentalists and anyone else trying to address
    sustainability at a , national, regional or global level. Aiming for sustainability without
    restructuring our money system is a na?ve approach, doomed to failure.

    So the money system is bad for social and environmental sustainability. But this
    Report also proves ? perhaps more surprisingly ? that the money system is bad for
    the money system itself. Unless we fundamentally restructure it, we cannot achieve
    monetary stability. Indeed, this Report also demonstrates that monetary stability
    itself is possible if, and only if, we apply systemic biomimicry ? that is to say, if
    we complement the prevailing monetary monopoly with what we call a ?monetary
    ecosystem?.

    Finally, the good news is that the information and communication revolution
    which we are living today is already pushing us in precisely the right direction.

    Let?s look at this idea of the money system as the ?Missing Link? in more detail.
    Our world is facing the immense challenges of a two-fold sustainability crisis. On one
    hand, climate change, rising greenhouse gas emissions and spikes in food and energy
    prices signal that our ways of producing and consuming goods and services have
    become unsustainable. On the other, repeated financial and monetary crises remind
    us that our money system has its own problems. The efforts to prop up and ?save?
    this money system during the 2007-2008 banking crash, followed by unsuccessful
    attempts to contain the toxic economic fallout with a ?Keynesian stimulus?, have given
    rise to stark increases in government indebtedness. In the wake of the sovereign-debt
    and euro crisis, both the United States and the EU governments are currently being
    driven to financial extremes. Pensions, unemployment benefits and other social safety
    nets as well as investment in a post-carbon economy are all in jeopardy at precisely
    the time when they are most needed. In parallel, many public assets are in the process
    of being privatised.

    Environmentalists often try to address the ecological crisis by thinking up new
    monetary incentives, creating ?green? taxes or encouraging banks to finance sustainable
    investment. Economists, in turn, tend to believe the financial crisis can be ?fixed? and
    kept from recurring with better regulation and a strict, prolonged reduction in public
    spending. But, whether they are advocating greener taxes, leaner government budgets,
    greener euros or dollars or pounds, could both camps be barking up the wrong tree?
    It is our contention that the ?Missing Link? between finance and the environment,
    between money and sustainability, lies elsewhere. What this Report demonstrates
    beyond doubt is a structural monetary fl aw ? a fl aw in the very manner in which
    we create money ? that is generating our disconcerting problems. The inescapable
    conclusion? That, in order to face the challenges of the 21st century, we need to
    rethink and overhaul our entire monetary system.

    CHAPTER I ? Why this Report, Now?
    This Report has three objectives:

    To provide evidence that the fi nancial and monetary instabilities plaguing
    Europe and the rest of the world have a structural cause that has been
    largely overlooked. Addressing this structural cause is a necessary (but not a
    sufficient) condition for dealing with today?s challenges.

    * To place the monetary problem, and solutions to it, in the context of two
    global issues: climate change and population ageing. Indeed it makes
    clear that, in order to avoid the worst scenarios of climate change, massive
    investment is needed now: investment that will require governmental
    leadership and funding. Concurrently, the retirement of baby boomers reduces
    government revenues while adding pressure to already severely strained social
    programmes. Both issues will reach their peak during this decade, and neither
    is compatible with austerity measures. Continuing to follow the current
    monetary paradigm will render governments powerless to address these social
    and environmental challenges.

    * To propose pragmatic solutions that can be implemented cost-effectively
    by citizens, non-profi ts, businesses or governments: solutions which would
    resolve at a structural level several critical sustainability issues currently
    facing many countries.

    History will probably see the period 2007-2020 as one of financial turmoil and
    gradual monetary breakdown. History has also shown that systemic changes in
    the monetary domain happen only after a crash. Therefore, the time to wake up to
    monetary issues is now.

    CHAPTER II ? Making Economic Paradigms Explicit

    Debates about economic issues rarely reveal the paradigm from which an economist
    is speaking. We start by making explicit the conceptual framework that underlies our
    approach, and compare it with other paradigms currently in use. Rather than defining
    environmental and social issues as ?externalities?, our approach sees economic
    activities as a subset of the social realm, which, in turn, is a subset of the biosphere.
    This view provides the basis for the emergence of a new set of pragmatic tools, flexible
    enough to address many of our economic, social and environmental challenges.

    We suffer from a three-layered collective ?blind spot? with regard to our money
    system. The first blind spot relates to the hegemony of the idea of a single, central
    currency. It is widely believed that societies have always, and must always, impose, as
    a monopoly, a single, centrally-issued currency, on which interest is charged. In fact,
    several interesting societies, such as Dynastic Egypt and Europe during the Central
    Middle Ages (from the 10th to the 13th century), have encouraged multiple parallel
    currencies. This latter approach has resulted in greater economic stability, equitable
    prosperity and an economy in which people naturally tend to consider the longer term
    more than we do.

    The second layer of our collective ?blind spot? is a result of the ideological warfare
    between capitalism and communism in the 20th century. Although minute differences
    between these two systems have been studied ad nauseam, what they have in common
    has remained less scrutinised: particularly the fact that both impose a single national
    currency monopoly that is created through bank debt. The only significant difference
    between the two is that, in the Soviet system, the state owned the banks, whereas, in
    the capitalist system, this occurs only periodically (usually after banks ?too big to fail?
    experience serious difficulties).

    From the 18th century onwards, the systemic status quo was institutionalised
    through the creation of central banks as enforcers of the monetary monopoly. This
    institutional framework spins the final layer of the ?blind spot?.

    These three layers explain why there is such powerful and enduring resistance to
    reconsidering the paradigm of a single, monopolistically produced currency.

    CHAPTER III ? Monetary and Banking Instability

    Today?s foreign exchange and financial derivatives markets dwarf anything else on
    our planet. In 2010, the volume of foreign exchange transactions reached $4 trillion
    per day. One day?s exports or imports of all goods and services in the world amount
    to about 2% of that figure. Which means that 98% of transactions on these markets are
    purely speculative. This foreign exchange figure does not include derivatives, whose
    notional volume was $600 trillion ? or eight times the entire world?s annual GDP in
    2010.

    It was in this colossal market that the 2007 banking crisis broke out. As with every
    previous banking crash, governments felt they had no choice but to rescue the banking
    system, at whatever cost to the taxpayer. While this is clearly the biggest crisis we
    have experienced since the 1930s, it is not the first one. According to IMF data, 145
    countries experienced banking crises. In addition, there were 208 monetary crashes
    and 72 sovereign debt crises between 1970 and 2010. That brings the grand total of
    425 systemic crises, i.e. an average of more than ten countries in crisis every year!

    The consequences in terms of unemployment, lost economic output, societal
    disruption and widespread human suffering are dramatic. The full financial costs of
    the 2007-2008 crisis are unprecedented. In the United States for instance, the $700
    billion Troubled Asset Relief Program (TARP) is often talked about, although it is only
    the first slice of the rescue operation. Mention of this programme is usually followed
    by the comment: ?most of that money has by now been reimbursed?. The US case is
    of interest because it is the only country where both the government and the central
    bank have been forced by the courts to reveal the total costs of the rescue programmes
    related to the 2007-8 crisis. In addition to TARP, forty-nine other programmes have
    been involved in the US rescue at a total cost of $14.4 trillion. In comparison, the total
    US GDP in 2007 was $16 trillion.

    The bailouts, followed by a large-scale Keynesian stimulus plan to avoid a
    deflationary depression, have resulted in enormous budget deficits and additional
    public debt. In the twenty-three countries most directly affected by the banking crash,
    government debt jumped by an average of 24% of GDP. Some European countries
    such as Iceland, Ireland, Latvia, Denmark and Spain fared worse, with increases in
    national debt between 30% and 80% of GDP.

    The timing could not possibly have been worse. The tidal wave of baby boomers
    retiring over the next decade will make for huge additional pressures on public debt.
    A 2010 study by the Bank for International Settlements (BIS) estimated that, by 2020,
    age-related defi cits will increase government debt to more than 200% of GDP in the
    UK and to 150% in France, Ireland, Italy, Greece, Belgium and the United States.
    This forecast is still optimistic because it rests on the assumption of low interest rates.
    By 2040, projected age-related expenses will propel the debt/GDP ratios for all these
    countries to somewhere in the range of 300% to 600%.

    The solutions recommended by the financial sector are a package of immediate,
    coercive austerity measures and a call for governments to privatise everything. In
    countries where the list of targeted government assets is known, this includes all
    public roads, tunnels, bridges, parking meters, airports, all government-owned office
    buildings, as well as water and sewerage systems. For the US, where data are available,
    this amounts to $9.3 trillion of federal, state and city assets. One assessment of the
    US situation by the financial sector is as follows: ?As soon as the political pain from
    cutting public services becomes greater than the cost in terms of votes lost due to
    selling assets, this market will take off. At the grass-roots level, this critical political
    pain threshold has now been reached.?

    Similarly in Europe, the UK has announced a ?16 billion privatisation programme;
    in Italy, 9,000 publicly owned properties were put up for sale by the Berlusconi
    government; France?s Sarkozy government sold all the country?s toll roads for ?5
    billion; the conditions attached to the Greek rescue package included a ?50 billion
    privatisation; and the list goes on. These pressures will remain pervasive for a long
    time. But what happens afterwards? Why would governments become more creditworthy
    once they have to pay rent for their offices, and have to pay tolls for their
    employees to drive to work on roads that were once publicly owned?

    Before proceeding blindly on this course, would it not be useful to determine
    whether, far from the current crisis being merely another case of gross financial
    mismanagement, there is an underlying systemic cause common to all financial and
    monetary instabilities?

    CHAPTER IV ? Instabilities Explained: The Physics of Complex Flow Networks

    Since the 19th century, mainstream economics has classified the economic system as a
    closed one. Closed systems have relatively little interaction with other systems or with
    the outside environment, while open systems do. An intellectually convenient feature
    of closed systems is that they reach static equilibrium when left undisturbed.

    This report proposes that we view the economy as an open system consisting
    of complex flow networks in which money circulates between and among various
    economic agents. It has recently become possible to measure with a single metric
    the sustainability of any complex flow network on the basis of its structural diversity
    and its interconnectivity. A key finding is that any complex flow system is sustainable
    if, and only if, it maintains a crucial balance between two equally essential but
    complementary properties: its efficiency and its resilience. When too much emphasis is
    put on efficiency at the cost of resilience, diversity is sacrificed. This will automatically
    result in sudden systemic collapses.

    We have a worldwide monetary monoculture in which the same type of exchange
    medium is put into circulation in every country: a single national currency created
    through bank debt. Such a monoculture tends to spawn a brittle and unsustainable
    system. The structural solution needed to give sustainability a chance, albeit totally
    unorthodox, is to diversify the available exchange media and the agents that create
    them. In short, in place of a monetary monoculture, we need a monetary ecosystem.

    CHAPTER V ? The Effects of Today?s Money System on Sustainability

    Monetary or financial crises can be highly destructive and are obviously not compatible
    with sustainability. What can be more difficult to perceive is how some mechanisms
    built into our current money system shape individual and collective behaviours, even
    when it is not in crisis. On the positive side, modern money should be credited with
    triggering an explosion of entrepreneurial and scientific innovation without historical
    precedent. However, there are also five other mechanisms that turn out to be directly
    incompatible with sustainability. They are:

    * Amplification of boom and bust cycles: Banks provide or withhold funding to
    the same sectors or countries at the same time, thus amplifying the business
    cycle towards boom or bust. Such amplification is detrimental for everyone,
    including the banking sector itself. In the worst-case scenario, we end up
    where we are now: when banks stop trusting each other.

    * Short-term thinking: ?Discounted cash flow? is standard practice in any
    investment evaluation. Because bank-debt money carries interest, the
    discounting of all future costs or incomes inevitably tends to lead to shortterm
    thinking.

    * Compulsory growth: The process of compound interest or interest on interest
    imposes exponential growth on the economy. Yet exponential growth is, by
    definition, unsustainable in a fi nite world.

    * Concentration of wealth: The middle class is disappearing worldwide, with
    most of the wealth flowing to the top and increasing rates of poverty at the
    bottom. Such inequalities generate a broad range of social problems and are
    also detrimental to economic growth. Beyond the economic issue, the very
    survival of democracy may be at stake.

    * Devaluation of social capital: Social capital which is built on mutual trust
    and results in collaborative action has always been diffi cult to measure.
    Nevertheless, whenever measurements have been made, they reveal a
    tendency for social capital to be eroded, particularly in industrialised
    countries. Recent scientific studies show that money tends to promote selfish
    and non-collaborative behaviours. These behaviours are not compatible with
    long-term sustainability.

    Far from being a behaviourally neutral and passive medium of exchange, as
    generally assumed, conventional money deeply shapes a range of behaviour patterns,
    of which the five listed above are incompatible with sustainability. The continual
    imposition of a monopoly of this type of currency thus directly affects the future of
    humanity on our planet.

    http://www.clubofrome.org/cms/wp-con...ve-Summary.pdf
    William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

  2. #2
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    Sustainability?

    Source.

    It's primary shitty third-worlders -- largely African and Arab -- that are spewing out children at an unsustainable rate. It's not until you get to number 43 that you get outside Africa and the Middle East. The world average is 2.55, just between spots 89 and 90. The first Western country on the list is the United States at number 126, with a birth rate of 2.05; and that's only because we have a shit-load of Mexicans here. Plus the US is the Western country with the most non-whites.

    Number one is Niger with 7.19.

    So if sustainability is an issue that you'd like to champion, take it up with the shitty third-worlders.


  3. #3
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    Quote Originally Posted by DOMS View Post
    Sustainability?

    Source.

    It's primary shitty third-worlders -- largely African and Arab -- that are spewing out children at an unsustainable rate. It's not until you get to number 43 that you get outside Africa and the Middle East. The world average is 2.55, just between spots 89 and 90. The first Western country on the list is the United States at number 126, with a birth rate of 2.05; and that's only because we have a shit-load of Mexicans here. Plus the US is the Western country with the most non-whites.

    Number one is Niger with 7.19.

    So if sustainability is an issue that you'd like to champion, take it up with the shitty third-worlders.
    and who writes the legislation that allows that to happen?

    who wrote the trade agreements like NAFTA and GAT that have hollowed out the working class in the US?

    who financialized the US economy?

    who took the USD fiat when history clearly shows that all fiat currency's eventually fail?

    who has been using PSYOPs since the 1950's on it's own people to get them to buy into consumerism and over-consumption?

    the US government whom is bought and paid for by the owners of the means of production.

    your racist ass can't see jack squat about the economic effects of policy, you only blame the people whom are nothing but pawns in a game whose rules they do not make or enforce.
    William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

  4. #4
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    "Today?s foreign exchange and financial derivatives markets dwarf anything else on our planet. In 2010, the volume of foreign exchange transactions reached $4 trillion per day. One day?s exports or imports of all goods and services in the world amount
    to about 2% of that figure. Which means that 98% of transactions on these markets are purely speculative. This foreign exchange figure does not include derivatives, whose notional volume was $600 trillion ? or eight times the entire world?s annual GDP in
    2010.

    It was in this colossal market that the 2007 banking crisis broke out. As with every previous banking crash, governments felt they had no choice but to rescue the banking system, at whatever cost to the taxpayer. While this is clearly the biggest crisis we have experienced since the 1930s, it is not the fi rst one. According to IMF data, 145 countries experienced banking crises. In addition, there were 208 monetary crashes and 72 sovereign debt crises between 1970 and 2010. That brings the grand total of 425 systemic crises, i.e. an average of more than ten countries in crisis every year!"

    is that the 3rd world's fault too DOMS? must be them and their super computers trading that 600T in derivatives annually on top of a global GDP of about 20T a year.


    CNN - World's wealthiest 16 percent uses 80 percent of natural resources - October 12, 1999
    William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

  5. #5
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    Quote Originally Posted by LAM View Post
    and who writes the legislation that allows that to happen?

    who wrote the trade agreements like NAFTA and GAT that have hollowed out the working class in the US?

    who financialized the US economy?

    who took the USD fiat when history clearly shows that all fiat currency's eventually fail?

    who has been using PSYOPs since the 1950's on it's own people to get them to buy into consumerism and over-consumption?

    the US government whom is bought and paid for by the owners of the means of production.

    your racist ass can't see jack squat about the economic effects of policy, you only blame the people whom are nothing but pawns in a game whose rules they do not make or enforce.
    US fiscal policy is the reason that Africans and Arabs have a high birth rate? That Nigerians breed at a rate of 7.19?

    The North American Freed Trade Agreement is the reason? That the General Agreement on Tariffs and Trade agreement, with 75 members from all over the world, including Niger, is the reason?

    Keep making up conspiracies and excuses if it makes you feel better.

    They're simply too stupid to stop shitting out too many kids.


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