financial reform for a sustainable economy - bernard lietaer

Towards a Monetary Ecology?Scientific Evidence for Complementary Currencies

Bernard LIETAERblietaer@earthlink.net

Key Ideas

• Chicago Plan is a significant improvement• It solves 2/3 of systemic monetary crises

• A monetary ecology can solve 3/3 of monetary crises

• + lower risk • + solve a series of non-financial sustainability

issues

Plan

• Systemic Cause for Instability

• Systemic Solution

• Chicago Plan: Advantages and Limitations

Symptoms of Systemic Monetary Instability ?

On-going financial crisis is the biggest, but not the first such crisis:Since 1970, IMF identified:

145 banking crashes 204 monetary collapses72 sovereign debt crises

Such crises are a remarkably “hardy perennial” (Kindleberger)

48 well documented major meltdowns between 1637 and 1929.

My claim: financial system is structurally unstable

Sustainability of Complex Networks

• Robert Ulanowicz 25 years of ecosystems flow data. Natural ecosystems have in common to be sustainable. What else do they have in common?

• Sustainability of complex network results from appropriate balance between Efficiency and Resilience, emergent properties from 2 structural variables of complex networks: diversity and interconnectivity

Complex Networks

Diversity and interconnectivity are 2 structural variables => applies to all networks with similar structure, including money system!

Structural variables are independent from what is being processed in networkbiomass in an ecosystem,

electrons in electrical circuit,

information in immune system,

money in an economy…

Resilience

Efficiency

Balance in Natural Networks

Efficiency

Resilience

(In)Balance in Our Financial Network“Monoculture = accident waiting to happen”

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100% Excess Efficiency

Excess Resilience

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Window of Viability

Natural Ecosystems

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Current Operation of Financial System

Window of Viability

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Collapse of Financial System

Window of Viability

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Collapse

Window of Viability

Natural Recovery

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Collapse of Financial System

Window of Viability

Reestablishment of Monopoly of Bank-debt Money

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Collapse of Financial System

Window of Viability

Reestablishment of Monopoly of Bank-debt Money

Plan

• Systemic Cause

• Systemic Solution

Resilience (Efficiency (A)(Diversity + Redundant Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Effect of Complementary

Currencies

Current Operation of Financial System

Window of Viability

Resilience ( Efficiency (A)(Diversity + Interconnections) (Streamlined)

Sustainability Optimum

0%

100%

Collapse

Window of Viability

Natural Recovery

Connectivity c

Sustainability Optimum

0%

100%

Diversity n n

3D Views

Plan

• Systemic Cause for Instability

• Systemic Solution

• Chicago Plan: Advantages and Limitations

Advantages of Chicago Plan

• Arguments of Dr. Kumhof are all valid

• If Chicago Plan had been in place145 banking crashes 72 sovereign debt criseswould not have taken place

Limitations of Chicago Plan

• It replaces a private monopoly with a public monopoly => lack of diversity in types of currency!

• 204 monetary collapses could still happen

• Chicago plan can only be implemented all or nothing => more risky than monetary ecosystem approach

Solution

Chicago Plan + allow experimentation with other types of media of exchange. Examples:

=> Business to Business Currencies (e.g. WIR)

=> Environmental currencies (e.g. Terra making profitable to think long term)

=> Social purpose currenceis (e.g Torekes)

Follow Up

• www.lietaer.com• bernard@lietaer.com

• « Money and Sustainability: the Missing Link » (Triarchy Press, 2012)

• Articles in 5 different peer-reviewed journals

=> see www.lietaer.com/research