See this the intro to the Chairman’s summary below..

THE WAYS OUT OF THE CRISIS AND
THE BUILDING OF A MORE COHESIVE WORLD

Chair’s Summary
Jean-Paul Fitoussi and Joseph Stiglitz

This year the G’s are meeting at a critical moment in history, at least
economic and social history. They will confront the gravest economic and
social crisis in almost 80 years. To paraphrase Keynes, the destiny of the
world is in the hands of the members of the G’s. They could act in such a way
that would allow us to get out of this situation, creating a future where
growth is more sustainable, friendlier to the environment, and where its fruits
would be distributed in a more equitable way, both within and among
countries. Otherwise, they will bear an enormous responsibility before
history, that of not having done the duty which has been delegated to them by
their people, despite having been in exceptional circumstances that gave
them much more room for manoeuvre than they would have had in ‘normal’
times.

That is why a group of ‘experts’, with no commitments other that of being
citizens of the world, decided to meet to reflect on what could be done,
hoping that from their reflection some useful recommendations to the
powerful of this world would emerge. This group, which christened itself the
Shadow GN, has been constituted under the leadership of Joseph Stiglitz and
Jean-Paul Fitoussi, thanks to a partnership between Luiss and Columbia
University.

EDITORIAL. This Progress Report will be the last about the campaign to put national and international monetary reform on the G20 agenda for 2nd April. That short campaign has contributed to growing awareness of the need for international and national monetary reform.

But it also strengthens one’s sense of the urgency of convincing a wider range of non-governmental organisations (NGOs) of that need. Even in normal times our skewed system of financial rewards and penalties motivates almost everyone in the world to get and spend money destructively – socially, environmentally, and economically. That results from creating money as profit-making debt, together with dysfunctional tax systems and public spending programmes.

This means that a wide range of non-governmental organisations (NGOs) should support monetary reform as part of wider money system reform . It is important for social issues (poverty, welfare, social injustice, health, human rights, etc), environmental issues (climate change, energy supply and use, water, food and agriculture, etc); the problems of ‘developing’ countries; and general economic and public policy issues (world future prospects; local and community economic development; ethical investing, trading and consuming; corporate social responsibility; etc).

Most NGOs still give priority to getting money from the existing money system for their own projects. Natural enough but, if the existing system remains unreformed, they will all continue to swim against a very powerful tide.

If you find target dates useful, the Copenhagen UN Climate Conference – http://en.cop15.dk – will be on 7th – 18th December, 2009. We must persuade it to recognise the key importance of having a money system that encourages everyone to save, not destroy, the world.

1. THE AFTERMATH OF THE G20 MEETING. Mainstream opinion has cautiously deemed it successful so far. But disagreements between G20 countries have not been resolved.

More important, as the economic situation worsens and anger grows against the bankers and the rich. It is likely to become more widely accepted that serious study of the feasibility of national and international monetary reform is needed. (For more about that, see Item 4 of Newsletter 22).

We can encourage this by publicising the questions in the one-page Note on “THE ROOT OF THE PRESENT CRISIS AND ITS CURE: Who Should Create The Money Supply? Should It Be Created As Debt Or Debt-Free?”. You can read it at www.jamesrobertson.com/presentcrisisroot.htm.

2. THE PROBLEM FOR PRESIDENT OBAMA is that, like Prime Minister Brown, he is insulated from reality by advisers from the conventional school of financial experts, who have never questioned if it’s right to depend on the commercial banks to create our public money supply.

However, there are green shoots of hope in the USA, as elsewhere.

Stephen Zarlenga and the American Monetary Institute – www.monetary.org – have prepared an American Monetary Act based on the necessary reform. They have backing in Congress from influential Congressman Dennis Kucinich. Please look at their website if you don’t already know it.

Hazel Henderson has been a friend and colleague since the 1970s. Her “Ethical Markets” website is strong on Reforming Global Finance – www.ethicalmarkets.com/category/reforming-global-finance.

It’s good to see, if you scroll down the page, that she includes contributions from John Bunzl – www.simpol.org – on “The G20 Can Change The Rules For Global Trade”, and from me on ” The Root Of The Present Crisis: Who Should Create The Money Supply? As Debt Or Debt-Free?”

In David Korten’s (www.davidkorten.org) “Agenda for a New Economy“(Berrett-Koehler Publishers – 2009, pbk, 196pp), he asks whether commercial banks are so vital for the national interest to justify showering them with trillions of dollars to save them from the consequences of their own excess (Answer, No), and whether there might be other more effective and less costly ways of providing necessary and beneficial financial services (Answer, Yes). One of these would be to “transfer to the federal government the responsibility for issuing money” (pp142-144).

This widely ranging, strongly decentralising book has been rightly acclaimed. It deserves a longer review at a later date. Its conclusion is surely correct. The people must first show the way we insist the leaders must follow. That will allow President Obama to join a people’s declaration of independence from Wall Street.

The same goes for citizens and our leaders in other countries too.

3. THE PROBLEM FOR PRIME MINISTER BROWN is that the past ten years have left him with a “boom and bust” reputation – exaggerated boasting followed by conspicuous failure. The recent short YouTube film – www.youtube.com/watch?v=u9sO25aFjDs by “renegade economist” Fred Harrison on “How Gordon Brown Broke Britain” presses it home – a relentless shredding.

Fred doubts if Gordon Brown has the flexibility to flip to the escape route in the scenario sketched in Item 4 of Newsletter 22. I nurse the hope that Brown, or a successor Prime Minister, will take it up when enough people have understood the facts as explained at www.endtherecession.org and other comparable websites.

4. THERE WAS A VERY ENCOURAGING BLOG POST from former nef director Ed Mayo on 19 March – http://edmayo.wordpress.com/2009/03/19/monetary-reform.

It reflects his perceptive and enthusiastic foreword that launched the publication of “Creating New Money” by nef nearly ten years ago – www.jamesrobertson.com/books.htm.

As he now says,

“We are moving into a new financial system as well as a downturn or depression. The radical toolkit deserves a fair hearing.

The idea that this was all the fault of Fred Goodwin (who I understand now has two bodyguards) is simply lazy thinking. It was not just individuals. There was a system at work and it is the system that we need to think anew.”

5. BRYAN GOULD (www.bryangould.net), the former Labour Shadow Cabinet member who is now back in New Zealand, contributes the last chapter in “The Crash – a view from the left”. He says,

“In particular, we should re-examine the role of the privately owned banks in the light of the current debacle and question whether they should ever again be allowed a virtual monopoly of credit creation. In view of the burden that bank failure has imposed on the taxpayer, should the banking function not be seen as essentially a public responsibility?”.

The book is published by Soundings and can be downloaded from www.lwbooks.co.uk/ebooks/crash.html.

Other contributors include Colin Hines, Toby Lloyd, Richard Murphy and Ann Pettifor.

6. TWO ORGANISATIONS that I hope will call for monetary reform next time.

(1) Global Coalition for Responsible Credit: A call on G20 leaders - www.responsible-credit.net/index.php?id=1980&viewid=42636.

(2) Rights and Humanity: Ubuntu Declaration for a Just and Sustainable World Economy.

7. THE NUMBER 10 PETITION to the Prime Minister has collected nearly 500 signatories since 2nd March – http://petitions.number10.gov.uk/ G20moneyreform. It will remain open until 30 April.

If you haven’t already signed it, please do; the eventual number will be a useful measure of support.

If you have signed it, but have not checked that your name is on the list, please look at it and check. We know of a number of people who thought they had signed, but had failed to confirm it on the automatic reply e-mail sent to them from No 10.

8. VIDEO NEWS. Nearly 2,500 people have watched Fred Harrison’s Renegade Economist film of me explaining the need for international and national monetary reform. Click here or on the image below to watch it.

9. Thanks. Finally, thank you to everyone who has supported this Crash Campaign. I hope to be in touch again in early May.

James Robertson
6th April 2009

PS. A Massive Fraud. I wonder whether Geithner or Summers will show this to President Obama – www.pbs.org/moyers/journal/04032009/ profile.html. Black is clearly a respectable and knowledgeable witness. Thanks to Steve Kurtz and David Weston who have both just sent me this.

james@jamesrobertson.com

www.jamesrobertson.com/g20monetaryreform.htm

• the rising number of our petition signatories
• mainstream monetary reform and decentralised alternatives e.g. in Transition Towns
• moves by Russia and other countries to put international monetary reform on the agenda, with support from the United Nations
• the possible consequences for Prime Minister Brown and President Obama, if differences among G20 countries result in failure to agree on a concerted policy to deal with the global crisis, and if this meeting is seen to be a flop, and
• what they should do about them.

1. The No 10 petition to the Prime Minister is now supported by more than 400 signatories.
http://petitions.number10.gov.uk/G20moneyreform
If you haven’t already signed, please consider signing. It only asks for the subject to be discussed at this stage. It is quick and easy to sign. Please tell anyone else about it who may be interested, including any networks you belong to.If you have signed, please check to see that your name is actually on the list of signatories. We know of people who think they have signed, but who must have failed to complete the confirming stage.
If you find that your name isn’t there and should be, please sign up again and then make sure you click on the link in the confirmation email that the Number 10 website will send you. Only once you have done this will your name appear on the petition.
NB. For immediate practical purposes the deadline is 30th March, not 30th April as the petition states. So there are only a few days left. But signatures after 30 March will still be valuable for supporting follow-up action by G20 governments after their 2nd April Summit.
2. The important link between mainstream monetary reform and complementary local currencies, local banks, etc.
I was very pleased to be interviewed on the phone by Marian Farrell of Transition Derry (http://transitionderry.ning.com) on 11 March. The interview can be heard at www.jamesrobertson.com/videoandaudio.htm#audio.
The interview was about the need for mainstream monetary reform, what it would involve, and why it is important for local monetary, financial and economic decentralisation in Transition Towns like Derry and other places aiming for local sustainability.
This prompts a comment about the wider context.
The aim, after this G20 Summit, must be to help to transform the world’s money system into a multilevel system – international, national and local – primarily designed to serve the public interest but also allowing groups of people and businesses to develop their own systems of exchange between their members – like LETSystems.
These local community currencies like Time Dollars, Ithaca Hours, LETS, Chiemgauers and others already existing in many countries – together with new local community banks, credit unions, investment funds, etc – can make an essential contribution to financial and economic decentralisation and self-reliance on a greater scale than exists today. For a vision of this, see www.neweconomics.org/gen/iouk100309.aspx.
Decentralisation and self-reliance can become a real possibility once mainstream monetary reform has freed us from depending on a public money supply created by banks as debt. If the banks are allowed to keep that power, they will obviously do what they can to limit the development of local competitors.
In other words they will use their power to keep us as dependent as they can on paying and being paid in the national currency for our purchases, earnings, pensions, benefits, etc. But, if the nationalised central bank has been given responsibility for creating the national money supply in the public interest, it will not have that reason to prevent us committing ourselves increasingly to decentralised alternatives.
Some well-intentioned advocates of local currencies oppose the proposal to transfer the creation of national money supply to a central bank which is democratically accountable to parliament and people, and to deprive the banks of their unaccountable power.
They think that that would transfer too much power to government, and suppose that just by deciding to use decentralised currencies and local banks ourselves we could painlessly erode the power of the banks. The banks love that idea!
3. International monetary reform SHOULD be on the G20 Agenda. Russia says so. So does China. So do UN advisers.
A head of steam is now building up on international monetary reform.
Detailed Russian proposals for the G20 meeting have now been published – www.euractiv.com/en/euro/russia-reaches-eu-ahead-g20-summit/article-180389.
A ten-page paper – www.kremlin.ru/eng/text/docs/2009/03/213995.shtml – includes the proposal to consider the “Introduction of a supra-national reserve currency to be issued by international financial institutions. It seems appropriate to consider the role of IMF in this process and to review the feasibility of and the need for measures to ensure the recognition of SDRs [special drawing rights] as a “supra-reserve” currency by the whole world community”.
China yesterday proposed replacing the US dollar as the international reserve currency with a new global system. The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”. The Chinese central bank Governor acknowledged a debt to John Maynard Keynes in the 1940s.
See – www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html.
A U.N. panel will recommend this week that the world should ditch the dollar as its reserve currency in favour of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar. The proposal is to create something like the old Ecu, or European currency unit – www.reuters.com/article/newsOne/idUSTRE52H2CY20090318.
Comment. International acceptance of the idea of a genuinely international supply of money created by an international agency, rather than continuing to rely on the currency of one self-interested nation, will have an additional significance beyond itself.
It will help more people to see that a corresponding reform is needed at the national level – to replace a money supply created by a self-interested group of profit-making banks with a money supply created by a public agency in the public interest.
4. Could the G20 meeting be a serious failure? If so, what then?

Introduction

This is another short-term update on progress towards getting monetary reform on to the G20 agenda for their meeting on 2nd April.

If you’re not terribly interested in monetary reform, please bear with me. The frequency of these newsletters and the concentration on that topic will ease up after the next three weeks or so.

1. Petitions

(i) The UK No 10 petition to the Prime Minister (mentioned in the last newsletter) is now supported by more than 200 signatories.

It needs many more by 2nd April to contribute powerfully to a growing international campaign for monetary reform. (Most people don’t yet understand that the way the present money system works motivates almost everyone in the world to help to destroy the prospect of human survival beyond the end of this century.)

As I said in the last newsletter, please consider signing the petition even if you are not yet fully committed to supporting monetary reform, as it only asks for the subject to be discussed at this stage. It is also quick and easy to sign.

Please let anyone you think may be interested know about this and, if you’re a member of any network, please also let them know.

Please note that for practical purposes the deadline is 30th March, not 30th April, as the petition states. So there are two weeks left.

You can sign the petition at:

http://petitions.number10.gov.uk/G20moneyreform

(ii) Similar petitions in Germany and France have been stimulated by our example:

Germany – www.freiwirte.de/resolution.htm

France – www.cyberacteurs.org/actions/lettre.php?id=382

Support in France and Belgium can also be found at http://aises-fr.org/citoyen.html and www.agoravox.fr/article.php3?id_article=51872.

2. Fred Harrison and Ross Ashcroft have just produced an excellent 8-minute film introducing my ideas with the title “It’s Our Money Anyway”. It was shot at my house and various locations in London, including outside Downing Street and the Bank of England.

This is how Fred describes the film:

“Governments say banks are too important to society to allow to go bust. What is the social component of the financial sector, and why isn’t it held within the public domain if it’s that important?

James Robertson, a doyen of the alternative economics movement, offers an answer. He links monetary to fiscal (tax shift) reform in our latest documentary.”

You can see the film here – www.jamesrobertson.com/videoandaudio.htm.

Fred has been outstanding for his correct predictions of the present boom/bust crash – see http://en.wikipedia.org/wiki/Fred_Harrison_(Author). See also his website at www.renegadeeconomist.com.

His Renegade Economist channel on YouTube shows a series of short films (not much more than 6 minutes each) on the fundamental problems affecting the global economy – www.youtube.com/renegadeeconomist.

3. “Why should banks be given the incredible privilege of creating a nation’s wealth, for their own profit?” asks James Bruges in his great short article Pseudo-money in the latest issue of Resurgence at www.resurgence.org/magazine/article2747-Pseudo-Money.html.

(A sample copy of the issue can be downloaded from www.resurgence.org/subscribe/sample-download.html.)

Who decreed that we have to depend on commercial banks to create as profit-making debt almost the whole of the money supply we need, and why? God or Nature didn’t decree it.

Ministers, legislators, finance ministries and central banks etc in all the G20 countries simply must not be allowed to continue avoiding these questions.

4.  What is “Quantitative Easing”? This term refers to the special authorisation now being given to the Bank of England to “print” new money out of thin air. The conventional wisdom normally throws up its hands in horror at the idea of our money supply being created as a public service.

So “quantitative easing” is presented as a one-off dose of a very special laxative designed in response to the present financial emergency to clear the constipation of the commercial banks after their gargantuan profit-making “credit” binge.

The hope is that this will be a successful last-ditch measure to persuade the commercial banks to resume their printing of the public money supply themselves out of thin air, and keep us dependent on them for creating it.

How crazy can the conventional wisdom get? Subject to the necessary safeguards to prevent political and electoral misuse and avoid inflation, getting the professionally independent Bank of England to create the amount of money we need, should be seen as a step towards a much better way for a 21st-century democracy to provide itself with its money supply.

5. Russia and the G20.

“The existing financial system, no matter how good it might be or how much some state may like it, is outdated. This is why I hope that the G20 summit in London on April 2nd will reach a consensus on key aspects of modernisation..”. President Medvedev in Spain on 2nd March.

More at www.itar-tass.com/eng/level2.html?NewsID=13637913.

6. Banking Secrecy and Tax Havens – www.guardian.co.uk/politics/2009/mar/03/gordon-brown-tax-havens.

Gordon Brown and other G20 leaders must act seriously on this. See the Tax Justice Network‘s specific practical proposals at http://taxjustice.blogspot.com.

7. Michel Chossudovsky from Canada powerfully criticises President Obama’s economic package as “leading to social havoc and the potential impoverishment of millions of people, largely serving the interests of Wall Street, the defence contractors and the oil conglomerates, and leading America into a spiralling public debt crisis. …

The economic and social dislocations are potentially devastating… Meaningful policies cannot be achieved without radically reforming the workings of the international banking system. What is ultimately required is to disarm the financial establishment.”

A full account is at www.globalresearch.ca/index.php?context=va&aid=12517.

8. Global Financial Meltdown: Forces beyond our control? Or the biggest Sting ever? This is another forceful blast from Canada in support for radical monetary reform, this one by Dave Patterson.

“If you turn off the television, and turn on your brain, and realise what a huge scam this whole thing really is, and the brazen theft of not only your money but the money of your children and grandchildren who will be paying these fraudulent debts for generations – then maybe you will find the strength and wisdom to do what is really necessary – stand up and say No More!!! – take control of your democracy, take back your money from those who are stealing it in front of your very faces, and send all of them to jail for the rest of their lives.”

Full, illustrated text at www.rudemacedon.ca/greatest-sting-ever.html.

9. Marian Farrell of Transition Derry (http://transitionderry.ning.com) interviewed me by phone on 11th March on the significance of monetary reform for a more decentralised and greener way of financial, economic and social life. The recorded interview should shortly be available on their website (see above) and mine.

10. On 28th March, thousands will march through London as part of a global campaign to challenge the G20, ahead of their 2nd April summit on the global financial crisis. More information – www.putpeoplefirst.org.uk.

James Robertson
14th March, 2009

james@jamesrobertson.com

www.jamesrobertson.com/g20monetaryreform.htm

By Hazel Henderson  © 2009
Prepared for the Emergency Congress – “From Crisis to a Just and Sustainable World Economy” London, February 23-25, 2009

The following is a presentation to the emergency congress in London co-sponsored by Tomorrow’s Company, the South African Human Rights Commission and Rights and Humanity, Feb. 23rd-25th, 2009, to provide input to Prime Minister Gordon Brown for the G-20 summit to be held in London April 2, 2009.

US President Obama’s decision to skip the first summit of leaders of the G-20 in Washington, November 15-16, 2008 reflected his understanding that the world economic order has changed.  The new global players in the Group of 20, led by Brazil, China, India, and many other now powerful industrializing countries of the South will challenge Mr. Obama’s own call for change.  Let us be clear – the global financial system and the processes of economic and technological globalization over the past 25 years have not only failed but have brought greater injustice, widened inequality, increased social disruption and wreaked enormous ecological damage.

While the first Communiqué from the leaders was guarded and polite, it clearly signaled a new economic order.  A new “Bretton Woods II process” will be launched on April 2, 2009 in London.  Agreements were reached in Washington on many needed reforms of the global financial system and the crises the lack of regulation and oversight, excessive greed, risk-taking and leverage have caused.  I have warned for decades how globalizing and interlinking all these 24/7 markets inevitably helped create chaos in the entire system.   While not naming the USA, the leaders blamed the crisis on “some advanced countries”  “whose policymakers, regulators and supervisors did not adequately appreciate and address the risks building up in financial markets.”  US citizens feel betrayed by Wall Street and their trust has been shaken.  The European leaders cited the need for new regulatory action to curb speculation, leverage, hedge funds, private pools of capital and derivatives such as the some $60 trillion of credit default swaps which played a key role in the turmoil.  The total of credit and derivatives contracts is estimated by the Bank for International Settlements (BIS) at $683 trillion.

The disgraced Wall Streeters and other financial players in the global casino are still in denial that financial sectors, particularly in the USA and Britain had metastasized to some 25% of their GDPs.  Switzerland is in a similar condition, while the fate of Iceland looms as a lesson.  An efficient financial sector should comprise much less than 10% of a country’s GDP.  The issue is how to downsize and deleverage all those illusory gains that have now become illusory losses that have corrupted money systems on which real productive sectors have come to rely.  The power struggles concern who is going to take the losses: the players themselves who profited on the upside, the shareholders and bond holders or taxpayers?  So far, in the USA, due to the

powerful Wall Street lobby’s influence in Washington, the taxpayers are taking the hit. So much trust has been lost that President Obama has inherited a poisoned chalice.

Meanwhile, China, Brazil, India, Russia, South Africa and other powerful members of the G-20 are also concerned with “a new international financial order that is fair, just, inclusive and orderly” as stated by China’s President Hu Jintao.  On the table will be fairer representation of voting power in the IMF, the World Bank and the WTO so as to reflect the new global reality that the USA is no longer the locomotive of the world economy.  Indeed, most of today’s global GDP growth (an inadequate measure) is, nevertheless, now provided by China, India, Brazil and other emerging economies of the South.  The USA, the world’s largest debtor, controls 17% of the votes at the IMF, while China, the world’s largest creditor, controls only 3.66%.  Unfortunately, the Obama administration’s top economic team: Larry Summers and Timothy Geithner bear heavy responsibility for the economic crisis and, together with former Treasury Secretary Robert Rubin, Jason Furman and Austan Goolsbee, they are trapped in old economic textbook models.

The 2009 report of the private Group of 30 elite financiers, chaired by former US Fed Chairman Paul Volcker, stuck to a familiar list of reforms of global financial architecture: more coordinated, transparent, international regulation, standards, governance and accounting practices, as well as limits on leverage, compensation and perverse incentives for risk-taking.  This Group of 30 representatives from Citibank, Morgan Stanley, JP Morgan Chase, AIG, Merrill Lynch and other now-humbled firms, has been studying the explosion of exotic derivatives for some two decades but has offered little useful advice other than calling for clearinghouses for over-the-counter contracts such as credit default swaps.

An important underlying issue is how capitalism itself must evolve.  The US-led model of economic growth, as measured by money-denominated GDP (see figure 1, GNP Problems), the so-called “Washington Consensus” of free markets and trade, open capital accounts, floating currencies, privatization, all dominated by mostly un-regulated global financial markets, has now clearly broken down.  China led the new debate by calling its summit meeting in Beijing in late October, 2008, attended by all the European countries, as well as the G-20 and other African countries as well.  The Bush administration’s disdain for such multi-lateralism left the USA way behind the curve, not invited to such important gatherings, including the Shanghai Cooperation Organization which includes Asian and Central Asian countries, including Iran.  Meanwhile China has formed close alliances worldwide, particularly with Europe, African countries and those in Latin America.  The new G-20 demands for fairness include democratization as well as expanding the United Nations Security Council to include permanent membership for Brazil, Japan, India and important countries of the South, such as Indonesia and South Africa, including scrapping the veto still wielded by the old “permanent five” victors of World War II.

All this is a rude awakening for many in the USA.  At least the Obama team is reversing the Bush administration’s ignoring of other countries’ interests and going it alone.  Today, most US citizens now realize that we need the world and the United Nations and that, indeed, the global financial crisis which began on Wall Street now requires global cooperation to solve.  This is the true dimension of change that President Obama must now face.  Former Assistant Secretary of the Treasury under Ronald Reagan, Paul Craig Roberts, warns President Obama that the Bush bailouts and the new $1 trillion-plus recovery plans must take a new course if the US dollar’s value is to stabilize.  Roberts warns that the $ trillions spent on fighting Bush’s unnecessary wars in Iraq and Afghanistan will bankrupt the fragile US economy and urges Obama to end both these senseless occupations.   Bank of Sweden Prize winner Joseph Stiglitz estimates the Iraq war alone will cost $3 trillion,  and in a recent editorial called for the US to take over its large, insolvent banks.

Reforming the un-regulated global casino must be addressed promptly if further harm to the innocent, poor and vulnerable is to be prevented..  The Communiqué from the G-20’s 2008 Washington summit clearly cited increased cooperation between nations as essential, particularly oversight of global banks and other financial players.  Cooperation is necessary to avoid “beggar-thy-neighbor” policies trying to advantage any one country, but this no longer can be couched in old “free trade” slogans.  Sovereign countries have rights to protect their citizens from private sector exploiters without being accused of “protectionism.”  British Prime Minister Gordon Brown suggested a “global collegium of regulators.”  However, no mention was made of the most urgent priority: to tackle the up to $3 trillion of daily currency trading, over 90% of which is speculation.  Bouncing currencies have led to much of the turbulence and excessive volatility in world markets as “contagion” spreads in minutes in this 24/7 around-the-clock trading.  A small, less than 1% tax on all trades has been advocated since the 1970s when it was proposed by economist James Tobin and in 1989 by former US Treasury Secretary Larry Summers.   Not only would this reduce speculation, but it would raise over $300 billion annually to meet UN Millennium Development Goals and fund needed public goods.

Such a currency-exchange tax would be simple to collect using a computerized system which can be installed on trading screens, such as the Foreign Exchange Transaction Reporting System (FXTRS).   This system operates like an electronic version of Wall Street’s venerable “uptick rule,” enacted in 1934 but repealed during the Bush II administration.  Today’s Wall Street traders themselves are calling for its re-instatement to curb naked short-selling.  The FXTRS computerized “uptick rule” gradually raises the basic, less than 1% tax whenever a bear raid starts attacking a weak currency.  Such bear raids are rarely to “discipline” a country’s policies, as traders claim, but rather to make quick profits.  In the transparent FXTRS system, traders selling falling currencies begin to see that the rising tax is cascading into the country’s currency stabilization fund and cutting into their gains.  Seeing no further profit, traders can voluntarily exit the market and search for some other currency or arbitrage opportunity.  The funds collected from such currency exchange taxes would, along with another issue of special Drawing Rights by the IMF, raise hundreds of billions of dollars.  (See www.HazelHenderson.com click on FXTRS.)

Hopefully, the April 30, 2009 summit will take up such proposals and lead to the rapid implementation of other Action steps to regulate financial markets already cited, including criminalizing tax avoidance and tax havens and exposing to shame countries that do not comply with the International Financial Action Task Force (www.fatf-safi.org), as well as harmonizing of regulations and standards between countries to prevent regulatory and tax regime arbitrage.  Professional groups, including the International Accounting Standards Board, IOSCO and others can be recruited to the task, as well as the companies in the UN Global Compact and the UN Principles of Responsible Investing.

The 800-pound elephant still not acknowledged is the need for monetary reform of fractional reserve banking itself, which allows banks to create most of a nation’s money-supply as debt – out of thin air.  Restoring the right of democratic nations to coin their currency directly (as required in the US Constitution) is now essential, particularly in the USA where debt is now crushing every sector and the Federal Reserve along with the Treasury are now printing money in clear sight of taxpayers.  In Britain, there are many such proposals for reforming the Bank of England, including those of the New Economics Foundation, banking experts James Robertson and those of Canada’s Committee on Monetary and Economic Reform (www.comer.com).   The American Monetary Institute has introduced a bill in the US Congress to achieve the gradual change needed in our banking system (www.monetary.org).

The market-fundamentalists abetted by the economics profession and the Bank of Sweden have waged a 30 year campaign to portray economics as a science.  They succeeded in persuading the Nobel Committee to set up a $1 million prize in the 1960s with the late Milton Friedman of the laissez-faire Chicago School as its early recipient.  This so-called Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel is now being criticized by many, including Nobel’s heir, lawyer Peter Nobel, Nassim Nicholas Taleb, author of The Black Swan (2007), myself  and many mathematicians including Ralph Abraham, Benoit Mandelbrot and other scientists.   Too many of these subsequent Bank of Sweden “Nobel Memorial” prizes have been awarded to laissez-faire economists, particularly those whose research purported to prove (using specious mathematics) why central banks must be free of all political control – even by the most democratically elected governments.  Today we see central bankers out of control, printing money, awarding favored treatment to large banks, reckless insurance companies like AIG, and claiming the privilege of secrecy.  The US Federal Reserve Board even refused Freedom of Information requests by Bloomberg, Fox News and other media with questions as to which companies have been so favored and by how much.  Now that the US Treasury is at last disclosing where the first $350 billion of TARP funds went, perhaps the Fed will follow suit.

More fundamentally, the failures of global monetary systems are rooted in the expansion of human knowledge and innovation as we transition from the early fossil-fueled Industrial Era to the cleaner technologies of the information-rich Solar Age (see figure 2).  Just as the gold standard failed to provide enough “bandwidth” for all the growth, innovation and new communication and transactions of the Industrial Age, so today’s money circuits cannot provide enough bandwidth for the greatly expanded communications and trading of today’s growing Information economy (see figure 3).

The disruptive technologies rapidly displacing those now unsustainable, polluting Industrial Age technologies have already burst out of the existing money circuits and narrow central banking regimes.  Money is merely one form of information, and now the pure information-trading platforms are providing the needed extra bandwidth for trading, including that exclusively for socially and environmentally responsible investors and companies helping grow the green, sustainable economy world wide  (see Ethical Markets’ Advisory Council which includes leaders of the Calvert Group, the Social Investment Forum, Green America, Innovest Strategic Value Advisors, Capital Missions Company, the World Business Academy and Iowa Progressive Asset Management, the leading US broker-dealer firm for socially responsible investing.  Many, including Ethical Markets Media, LLC, are signatories of the UN Principles of Responsible Investing, which represents pension fund and other institutional asset managers $15 trillion under management.

Beyond securities trading on secure internet platforms like Archipelago, Instinet and such networks as Wall Street Without Walls, prosper.com and others, we have seen the explosion of internet trading (B2B, peer-to-peer, C2B, etc.) since 2000.  They include such major companies as e-Bay and Amazon, social networking sites like MySpace, Facebook and LinkedIn, as well as all the new electronic barter and gifting sites, Craigslist, Freecycle, Global Giving, Green Grants as well as thousands of similar electronic trading systems, cell phones, radio programs and local scrip “currencies” used to match needs and resources and clear local markets starved of credit.  Wall Street’s single-minded focus on money led to its demise.  Money was equated with wealth and ignored all the other forms of wealth, from human skills, networks and ingenuity to the productive systems of nature in which all economies are embedded.  Money, like gold, will remain a useful store of value and medium of exchange, but now as part of a new broader, more inclusive regime dominated by pure, information-based markets.

So, where should the G-20 begin in April at their London summit?  China and the European Union’s lead in October 2008, convening 40 leaders for the 7th Asian-European Meeting in Beijing, included representatives of the 27 European countries, 10 ASEAN countries, the European Commission, China, Japan, South Korea, India, Pakistan and Mongolia.  China’s foreign ministry spokesman Qin Gong said “China maintains that the international community should strengthen cooperation and jointly handle the current financial crisis on the basis of equal consultation,” as reported by analyst Antoaneta Bezlova in Other News, October 22, 2008.  UK Prime Minister Gordon Brown proposed the global system of collegial financial supervision, including empowering the IMF to monitor global markets.

French President Nicholas Sarkozy, who commented on the financial meltdown as: “an act of treason against the values of capitalism,” will announce the report of his Commission, headed by Joseph Stiglitz and Amartya Sen (also a Bank of Sweden Prize winner) on how to correct GDP and incorporate health, education, environment and poverty indicators.  This agenda was endorsed by EU Commission President Manuel Jose Barroso at the European Parliament’s BEYOND GDP conference convened by EC Commissioner Stavros Dimas, EUROSTAT, the OECD, the World Wildlife Fund and myself, representing the Club of Rome (see proceedings at www.beyond-gdp.eu).  My company also funded London-based GlobeScan’s opinion survey in ten countries which found large majorities in all ten countries (Australia, Brazil, Canada, France, Germany, Great Britain, India, Italy, Kenya and Russia) favoring the inclusion in GDP national accounts of available health, education, environment and poverty indicators (see www.ethicalmarkets.com and www.globescan.com).

Clearly, the world’s money systems have been corrupted, and the basic value of trust which underlies all markets has been shattered.  We are now learning that not all our transactions can be trusted to money systems and that in today’s Information Age there are the many new, pure, information-based trading systems mentioned earlier, including international barter,  “countertrade” between governments, trading between global companies of everything from media and telephony to commodities.  Information and money are equivalent mediums of exchange and equally valuable.  Many investors are now bypassing Wall Street and big money centers in favor of private equity on trusted electronic liquidity and trading networks.  Such insights into the use of information and trading networks, including local currencies, barter and people-to-people lending are part of the emerging information-rich Solar Age economies now superseding the earlier fossil-fueled Industrial Age.

As the USA will play catch-up at the April summit, there are some additional reforms they might sponsor:

*  Imposing globally-harmonized currency exchange taxes is an obvious step.  Promoted, as mentioned, for decades by economists from James Tobin, Bank of Sweden’s Nobel Memorial prizewinner, to former US Treasury Secretary Larry Summers, this below 1% tax on the $3 trillion daily currency trading would reduce some of its 90% speculative activity.  Recent levels of turbulence in currency markets are not sustainable, and Ben Bernanke’s selling US dollars to buy other currencies was unprecedented.  Only global regulation of currency markets, by the FXTRS or similar systems, can address the problem of weaker currencies leading countries to default.

*  To reduce the over $1 trillion annually countries spend on military hardware, the summiteers can agree on the proposed United Nations Security Insurance Agency (UNSIA).  Militarism is ever-less useful in resolving today’s conflicts in Iraq, Afghanistan and other guerilla insurgencies.  This UNSIA proposal, backed by four Nobel laureates, would allow countries which wished to follow Costa Rica’s lead in 1947 and abolish their armed forces.  Instead, countries could buy the insurance of a peacekeeping force from the UN Security Council (expanded and veto-less).  Their premiums would be determined by insurance industry risk assessors contracted to see that the country had no WMD or secret weapons and did not teach militarism and xenophobia.  Countries, say those in Central America, that decided to all buy UNSIA insurance would all get lower premiums.  The premiums would fund a standing, properly trained UN peace-keeping force and complimentary contingents of NGO peace-making conflict-resolution groups.  The UNSIA proposal is taught in many university programs and was debated in the UN Security Council in 1996 (see UNSIA at www.hazelhenderson.com).  This and other proposals, including the FXTRS, are also described in The United Nations Policy and Financing Alternatives, (1995).

These two global reforms could be introduced at the London summit, debated in the UN General Assembly and ratified by member countries.  Many other reforms discussed earlier should be on the agenda:

•    Reform of ill-designed monetary systems based on debt (see www.ethicalmarkets.tv “Money as Debt” and the American Monetary Reform Act of 2008 at www.monetary.org); in the UK, monetary reforms proposed by banking expert James Robertson at www.jamesrobertson.com and those of the New Economics Foundation at www.neweconomics.org).  This includes raising capital reserve requirements for banks and reducing leverage used by all financial players.

•    Criminalizing of tax arbitrage and avoidance in tax havens, including those non-cooperative countries and territories black-listed by the US Treasury and many central banks (see the international Financial Action Task Force NCCT Initiative at www.fatf-gafi.org).

•    Regulating and requiring full disclosure of hedge funds, private equity funds, sovereign wealth funds, credit derivatives and “dark pools” of capital.  Harmonizing market rules to prevent arbitrage between major securities markets.  Changing incentives toward long-term investment goals and limiting compensation by giving shareholders a voice on this and other social, environmental and governance issues now clearly material to stock valuations.  Rating agencies should only accept fees from investors, not issuers of securities.

•    Repealing Basel II rules which allowed banks to assess their own risks, the failure of which helped bring on the crisis.  Raising capital adequacy and reserve ratios and reducing margins on all transactions.  Leveraging standards on banks operating internationally are also needed.  Many of these proposals are by law professor Daniel K. Tarullo, an advisor to President Obama, in Banking on Basel.   Raising margin requirements and increasing Basel II capital reserve ratios also reduce speculation in all markets and futures and derivatives exchanges.

All these regulations, as we have learned, are to re-balance the roles of private and public sectors now that governments have been forced to intervene using taxpayers money.  The new rules must be by international agreement lest market players skip from state to state “arbitraging” different jurisdictions and tax regimes.  Even the World Economic Forum in Davos in January found a consensus of both government and business leaders for such global-level agreements and standards.  The UN Principles of Responsible Investment are calling for similar reforms.  At last, this global financial crisis brings the opportunities discussed for decades to reform today’s global casino and restore finance to its vital but limited role in facilitating real production and innovation in the world’s real economies.

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Hazel Henderson, president of Ethical Markets Media, LLC, is author of Ethical Markets: Growing The Green Economy (2007) and co-creator with the Calvert Group of the Calvert-Henderson Quality of Life Indicators regularly updated at www.Calvert-Henderson.com.  She can be reached at www.EthicalMarkets.com and, her TV shows are at www.ethicalmarkets.tv.