Financial reform for a sustainable economy - Bernard Lietaer

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Towards a monetary ecology - scientific evidence for complementary currencies.

Stockholm 28 January 2013

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  • Caprio and Klingelbiel, “Bank Insolvencies: Cross Country Experience,” Policy Research Working Papers no.1620 (Washington, DC: World Bank, Policy and Research Department, 1996).
  • Financial reform for a sustainable economy - Bernard Lietaer

    1. 1. Towards a Monetary Ecology?Scientific Evidence for Complementary Currencies Bernard LIETAER blietaer@earthlink.net
    2. 2. 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
    3. 3. Plan• Systemic Cause for Instability• Systemic Solution• Chicago Plan: Advantages and Limitations
    4. 4. 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 collapses 72 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
    5. 5. 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
    6. 6. Complex NetworksDiversity and interconnectivity are 2 structural variables => applies to all networks with similar structure, including money system!Structural variables are independent from what is being processed in network biomass in an ecosystem, electrons in electrical circuit, information in immune system, money in an economy…
    7. 7. Balance in Natural Networks ResilienceEfficiency
    8. 8. (In)Balance in Our Financial Network“Monoculture = accident waiting to happen” Efficiency Resilience
    9. 9. Sustainability Optimum 100% Excess Efficiency Excess Resilience 0% Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    10. 10. Sustainability Optimum Natural Ecosystems 100% Window of Viability 0% Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    11. 11. Sustainability Optimum 100% Window of Viability Current Operation of Financial System 0% Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    12. 12. Sustainability Optimum 100% Window of Viability 0% Collapse of Financial System Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    13. 13. Natural Recovery Sustainability Optimum 100% Window of Viability 0% Collapse Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    14. 14. Sustainability Optimum 100% Reestablishment of Monopoly of Bank-debt Money Window of Viability 0% Collapse of Financial System Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    15. 15. Sustainability Optimum 100% Reestablishment of Monopoly of Bank-debt Money Window of Viability 0% Collapse of Financial System Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    16. 16. Plan• Systemic Cause• Systemic Solution
    17. 17. Sustainability Optimum Effect of 100% Complementary Currencies Window of Viability Current Operation of Financial System 0% Resilience (Φ) Efficiency (A)(Diversity + Redundant Interconnections) (Streamlined)
    18. 18. Natural Recovery Sustainability Optimum 100% Window of Viability 0% Collapse Resilience (Φ) Efficiency (A)(Diversity + Interconnections) (Streamlined)
    19. 19. 3D Views 100% Sustainability Optimum Diversity n n 0%Connectivity c
    20. 20. Plan• Systemic Cause for Instability• Systemic Solution• Chicago Plan: Advantages and Limitations
    21. 21. Advantages of Chicago Plan• Arguments of Dr. Kumhof are all valid• If Chicago Plan had been in place 145 banking crashes 72 sovereign debt crises would not have taken place
    22. 22. 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
    23. 23. SolutionChicago 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)
    24. 24. 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

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