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.

Tuesday, March 24, 2009

The high-level UN commission of experts on reforming the international monetary and financial system, chaired by the Nobel prize-winning economist Joseph Stiglitz, has now issued its preliminary recommendations. We are highly encouraged by what we see.   Link to article

• 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?

The phrase “it’s not fair” is not just the preserve of petty childhood tantrums – you hear it a lot in climate negotiations between global leaders too. Now, a proposal to force rich people everywhere to stick to personal emissions targets offers hope for a fairer climate deal.

The plan was put forward by Heleen de Coninck of the Princeton Environmental Institute at the Copenhagen climate congress last week.

The Kyoto protocol, which will expire in 2012, divvies up emissions rights roughly according to how much nations emitted during the 20th century.

While industrialised countries were given different targets according to what they could reasonably achieve, developing nations are not required to limit their emissions at all on the grounds that their 20th century emissions were negligible compared to those of rich nations.  Link to article

“The first myth to dispel is that interest rates are currently low. Base rates may be low, but the rates that companies pay, as Warren Buffett has argued is at ‘record levels’.  He tells shareholders that “highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels.  Though Berkshire’s credit is pristine – one of only seven AAA corporations in the country – (its) cost of borrowing is now far higher than competitors with shaky balance sheets but government backing.”

Graham Turner shows that ‘average yields on loans for non-investment grade companies in the UK rose to 31.66% on the 4th March, 2009.’ These are bankrupting rates.

Environmental Capital,

WSJ Blogs

• March 17, 2009, 10:10 AM ET,By Keith Johnson
• China’s latest climate-change gambit is to make countries that import its stuff responsible for a share of its emissions. It might not be such a crazy idea.
• Chinese climate negotiators, in Washington laying the groundwork for international climate talks later this year, floated the idea yesterday. Chinese factories churning out stuff for the developed world account for between 15% and 25% of China’s total greenhouse-gas emissions, top climate negotiator Li Gao said. Which means the developed world should take responsibility for them:
  

  “We produce products and these products are consumed by other countries, especially the developed countries. This share of emissions should be taken by the consumers but not the producers,” he said.

  Other climate-policy types in Washington quickly poured cold water on the idea. Such emissions accounting would be a logistical nightmare, for starters. And if rich countries “own” those export emissions, they would then have oversight over what goes on in those Chinese factories, which probably wouldn’t sit well with Beijing.

  But a pair of academics who’ve been studying the relationship between trade and emissions suggest China’s idea would have a couple of advantanges.

Written by Simon Johnson @ The Baseline Scenario

March 17, 2009 at 5:57 am

Stabilization programs in emerging markets often come down to this: the government needs to do something unpopular, e.g., reduce some subsidies, privatize an industry, or eliminate the crazy credit that goes to oligarchs – no one likes oligarchs, but their factories employ a lot of people.  There is naturally resistance - pushback from legislators, riots in the streets, or oligarchs calling their friends in the US foreign policy establishment.  The question becomes: does the government have the ”political will” to get the job done?

In fall 1997, a key issue for Indonesia’s IMF program was whether the government could close the banking operations belonging to one of President Suharto’s sons.  There was an epic and fascinating struggle and, in the end, the government did not have sufficient political will or power.  The subsequent loss of US support, and further currency and economic collapse is (messy and painful for many) history.

It is striking that Ben Bernanke now asks whether the United States today has sufficient political will.  Link to article

“The CDS market is also complicating restructuring of distressed loans as all lenders do not have the same interest in ensuring the survival of the firm. A lender with purchased protection may seek to use the restructuring to trigger its CDS contracts.

CDS investors influenced the financing or restructuring of VNU, the multinational media business, GUS, the UK retail group, and Cablecom, a Dutch communications company. In February 2009, the US unit of LyondellBasell, the world’s third-largest petrochemicals group that is in Chapter 11, secured a temporary restraining order and preliminary injunction against a group of creditors looking to enforce claims in a bid to trigger protection payments under their CDS contracts.”

It is not necessary to understand every nuance of this article to get the message that another, entirely different approach to managing risk is overdue.  One way that might be considered is to accept risk and prepare for the downside i.e. build resilience.  While costly, this approach can have other beneficial, also difficult to model, upsides.  Another approach to managing risk is to align all interests in the deal to share the risk equally in a partnership structure such as advocated by Chris Cook in his ‘Open Capital’ LLP model.  That way no-one participant gets to be the fall guy when bad times hit.

The single message Das expounds is – if you don’t understand the risk instrument being sold to you, it ialmost certain  that no one else does either, including the seller.   Link to full article

]]> http://smarttaxes.org/2009/03/11/the-risks-of-hedging-risk/feed/ 0 http://smarttaxes.org/2009/03/08/the-terra-international-monetary-union-timu/ http://smarttaxes.org/2009/03/08/the-terra-international-monetary-union-timu/#comments Sun, 08 Mar 2009 12:49:25 +0000 Emer http://smarttaxes.org/?p=680 SUMMARY POSITION STATEMENT (SPS)
on
THE TERRA INTERNATIONAL MONETARY UNION (TIMU)
by
Frans C. Verhagen, M.Div., M.I.A., Ph.D.,
Sustainability sociologist
Founding President, The International Institute of Monetary Transformation www.timun.net
ECOSOC Representative, the International Peace Research Association
President, Earth and Peace Education Associates International (EPE)
www.globalepe.org; gaia1@rcn.com ; www.fcvnyc.blogspot.com
718 275-3932(voice and fax); 917 617 6217 (cell)

New York City

February 7, 2009

The goal of any reform of the international monetary system which is the glue of the world’s financial and economic system is to achieve stability, which can only be accomplished by pursuing equity and sustainability. To reach this goal of an equitable, sustainable, stable monetary system quite a few reforms are being proposed to deal with the deepening financial and economic crises which will get worse, particularly if no proper and timely reforms are implemented. It is argued here that

1.    reforms that predominantly are national or regional in scope rather than global will not achieve those three monetary goals and
2.    reforms that do not simultaneously address themselves to the ever deepening climatological crisis will equally fail to make lasting impact.

Thus, it is proposed here that a genuine transformation in the international monetary system is to take place that addresses itself to both to the economic and climatological crises. The Terra International Monetary Union (TIMU) or TIMU architecture is presented here for serious consideration and ensuing policy development, particularly by the new Obama Administration.

Faced with the economic and climatological crises and their associated crises in food and fuel the year 2009 may become an axial year in the history of the planet and humanity. It is during this and the following years that humanity has to come up with wide-ranging measures that will set the economic and climatological trajectory of this new century. What is most needed in devising this road map are a deep understanding of  the crises’ origins and their vertical and horizontal interconnectedness, and the explicit adoption of  a set of integrated social and ecological values that provides the vision for this most important of journeys.

Following the findings of financial historians such as Niall Ferguson, Barry Eichengreen and of political economists such as Benjamin Cohen, applying the values and vision of the Earth Charter–the 21st century successor of the 20th century Universal Declaration of Human Rights– and using the EPE sustainable communities development’s planning framework of contextual sustainability, I have to come to the following conclusions. They will be listed here and explained below.

1.    Government, business and civil society are to seriously consider making carbon emissions permits the basis of a new international currency, so that ecological creditor nations in the global South are able, as a matter of historical justice, to receive the necessary funds for their economic development and for their policies and programs in dealing with the climate and energy crises.

2.    They are to seriously consider the adoption of  the monetary architecture of an emissions-based currency unit such as the one proposed in the Terra International Monetary Union to wit: its World Central Bank, its modified balance of payments schedule and the independent national Terra Administrations or Terra Boards in participating or TIMU Treaty nation states.

3.    Presently advocated reforms such as the International Clearing Bank (D’Arista), Global Green Dollars (Stiglitz), INTOR (Mundell) and similar efforts of non-emission based currency concepts are considered steps towards the emission-based currency concept of the Terra and its international and national monetary architectures.

The new international currency of the Terra (Latin for Earth) which  is based upon carbon emissions permits which are allocated following the Cap and Share methodology, is to function as a means of international exchange, a store of value and the accounting unit of carbon credits and debits.

Treaty nations will use a modified balance of payments schedule where carbon balances in the form of Terras are added to the many economic account lines in their current and capital flows accounts, so that both their economic and climatological balances are integrated in one place and considered of equal financial value. In order to avoid co-mingling the Terra currency with the national and other local currencies (LETS) each treaty state will establish an independent Terra Administration or Board that administers the carbon based international currency.  Much of the Treaty content can be based upon the FEASTA Draft of the Noordwijk aan Zee Treaty of 2000, organized by Ode Magazine with the assistance of Irish economist Richard Douthwaite and British artist Aubrey Meyer of Contraction and Convergence fame.

The World Central Bank (WCB) like a global European Central Bank carries out its administrative, monitoring and credit creation functions under the governance of the treaty nations. Though the treaty nations surrender some substantial sovereignty, the WCB is not a world government. It would be part of the UN system roughly in the same way the IMF is affiliated with the UN today. Some of the activities of the IMF can be transferred to the WCB, but not its weighted decision making, its subscription or capital structure and other elements.

A fourth major component of the TIMU system is its emphasis on bioregional economics. The present economic crisis has clearly shown that an export-oriented economy, particularly by developing nations to gain foreign exchange to pay for their debts and often to buy luxury items for their elites, is not workable. Even industrialized nations such as the USA and Germany are suffering huge decline in exports. Thus, placing priority on sustainable bioregional economies with a reduction of international trade is to be recommended. On account of the climate crisis frugal trade with a reduction in food, goods and services miles is to be pursued besides fair and free trade.

Two additional components of the TIMU architecture are 1. fixed exchange rates which are set annually by the WCB based upon the carbon price of the global carbon market; 2. the methodology of capping GHGs, particularly CO2 and its allocation as developed by the Dublin-based CSO www.capandshare.org
The politics of a TIMU Treaty are complicated and will entail heavy lifting by not only governments, but also business and, perhaps less so, civil society. A mobilization strategy is being developed based upon theories of my former Columbia sociology professor Amitai Etzioni in his Active Society.
At the highest level of UN decision-making a major support for TIMU seems to be forthcoming. On October 30 a day-long interactive Panel on the Global Financial Crisis was convened by General Assembly President Father Miguel D’Escoto Brockmann. There were several points of agreement that augur well for a serious consideration of the TIMU Treaty.  Member states

1. “recognized the need for deep changes in the governance of the international financial institutions”;

2. “made an urgent call for the United Nations to play a central role in the search for solutions”;

3. agreed that dealing with the financial crisis requires coordination with the climate, food and fuel crisis. Out of this high-level consultation the President’s Commission on the Reform of the Monetary and Financial System has emerged which made its first report on January 7. http://un.org/ga/president/63/commission/financial_commission.shtml

On January 15 during a briefing to the NGO community at UN Headquarters Dr. Michael Clark, senior advisor to the Commission, responding to my question about  the feasibility of having an international currency based upon carbon emissions permits allocated according to the cap and share methodology  and incorporating carbon balances into a modified balance of payments schedule, exclaimed “That’s brilliant.” The previous questioner, a Maryknoll sister, had asked how the President’s Commission was going to incorporate the climate crisis. His answer was tentative and, so, I think that was the reason that he was relieved by hearing the Terra proposal.
Though there are about a score of reasons why the TIMU proposal is a good one and whose time seems to have come, one of the most important reason is the transfer of Terras from  the North to the South, so that humanity is able to push forward with the MDGs. Given the poor outcome of the latest round in Funding for Development (FFD) in December at Doha—IMF and IBRD were even absent—TIMU’s financial flows would be an enormous leap forward in resolving the myriad of funding needs for UN programs, for funds in the form of Terras would flow from the ecological debtor nations in the rich North to the ecological creditor nations in the poor South.

In conclusion, the confluence of the economic and climatological crises and their ever deepening impact on all people and societies in the global North and South is a grand opportunity for rethinking and transforming the international monetary architecture. Such international monetary system would become the glue of a transformed international financial and economic system replacing the present international economic system that still enriches the few, impoverishes the many and endangers the planet. The proposed Terra International Monetary Union or TIMU system could be an essential part of a comprehensive approach to dealing with the global economic recession and the climate crisis, while also expediting humanity’s transition into  sustainable societies which will lead to greater purchasing power and quality of life not only in the global North, but especially in the global South.

RESOURCES AND FOLLOW-UP ACTION

Resources for the TIMU project will be available in medio February at www.timun.net while http://groups.yahoo.com/group/TIMUgroup/?yguid=72581814 is open for participation. Readers are strongly urged to become part of the TIMU Working Group now and, later on, of the Institute in order to carry this enormous challenge of TIMU forward. Every reader is invited to sign the International TIMU Petition and have his/her network, physical or online, do the same. An important source of worldwide activities on monetary reform can be found on www.ethicalmarkets.com. There this SPS is listed together with two other outstanding statements. The website also shows the excellent work that Dr. Hazel Henderson has been doing for many decades. It is not only her widely acknowledged understanding of economics and monetary matters that shines through, but also her ethical commitment as expressed  in her use of the integrated value system of the Earth Charter.

Finally, those who are interested in the full description of the TIMU architecture and its politics to implement it  can purchase a hard copy or an electronic one of my book TIMU: The Transformative Monetary Approach to Resolving the Global Economic and Climatological Crises  from Cosimo On Demand Publishing, New York City, the publication date of which will be Summer 2009.

“Action does not spring from information, but a readiness for responsibility.”
Dietrich Bonhoeffer

An American sociologist, Dr. Frans C. Verhagen, who teaches on sustainable communities at Pace University, New York, has just launched a website, http://www.timun.net/,  to promote a global currency “based upon carbon emissions permits which are allocated following the Cap and Share methodology”.  Dr. Verhagen’s currency is called the Terra. This is doubly unfortunate as not only will it be confused with Bernard Lietaer’s proposed currency with the same name but also because the word sounds like “terror”. I have not yet checked to see how this Terra differs from the ebcu. The attachment sets out the case for the new money.

I am in touch with Dr. Verhagen, who certainly seems to be pushing the idea hard, which is great.
http://www.feasta.org/forum/posting.php?mode=reply&t=799

This post includes an attachment. You can download it from the following link:
http://www.feasta.org/forum/viewtopic.php?p=1254#1254