The recent interest rate hikes have been causing some problems in the banking sector, including a bank run on Silicon Valley Bank. Reactions have varied from “this is another banking/financial crisis like 2008” to “no big deal.”
But the timing is interesting because the U.S. Federal Government is in the process of hitting the “debt ceiling.” I previously wrote about the debt ceiling and the Trillion Dollar Coin as a teachable moment). It stands to reason, then, that a simultaneous banking and Government-debt crisis is a double teachable moment.
So let’s talk about debt. Money is created as debt. Banks give out loans, or governments pay for things (accounted as “the national debt”). Additionally, those bank loans are not charity. They generally come with a positive interest rate attached, meaning lendees must pay back more than they received. So they must grab someone else’s money to make that payment, meaning someone somewhere has less than they started with. So yes, in our banking system, some bankruptcies are inevitable. The linkage of positive interest to higher prices (expressed as “inflation”) leads to the prevalent feeling that the treadmill is always speeding up. It is a world built on scarcity. Meanwhile, loan recipients pay interest, and those payments go to bank owners (who I presume wear top hats and monocles like the guy from the Monopoly game). Yes, a positive interest rate funnels money from the poor (debtors) to wealthy lenders.
This system works very well for…you guessed it, the 1%. And when problems arise, bailouts are quickly conceived to help out…yes, the 1%.
So here we are, at FEASTA, asking a question. Could a new monetary system be developed for the 99%? It would be a system that a) is not created with debt and interest payments, and b) has a zero or negative interest rate. It is possible that a debt-free money would not inherently need an interest rate. I believe this question could motivate the development of a “ecological monetary reform” movement.
Is there an ecological monetary reform movement?
Filipe Alves, a Portuguese researcher and entrepreneur, was inspired by FEASTA founder Richard Douthwaite and others working in this space. With his co-authors, Alves published a paper in the Journal of Studies on Citizenship and Sustainability on “Alternative monetary narratives and experiments.” He hopes to systematize and bring together the various strands of thought inspired by thinkers such as “Silvio Gesel, Irving Fisher, Karl Polanyi, John M. Keynes and more recently Thomas Greco, Gill Seyfang, Peter North, James Robertson, Ellen Brown and Bernard Lietaer.” In a second paper, Alves and his colleagues typed the following keywords into search engines: ecological monetary theory; monetary transition; money and sustainability; money and regeneration.
Alves notes that Bernard Lietaer rightly pointed out that the current design of the international monetary system, beyond being a driver of economic inequality and instability/volatility, is also a key instrument for ecological destruction and climate change. That ecological critique is distinctive and separates an Ecological Theory of Money (ETM) (a term coined by Joe Ament in a 2020 – though arguably described by Douthwaite, Lietaer and others well before that) from other monetary reform movements such as Modern Monetary Theory (MMT).
Unfortunately, Lietaer’s groundbreaking 2013 book has not been taken up by the Central Banks, and think tanks (including FEASTA) remain under-funded, despite the major importance of monetary reform to transform the economic system away from the fossil-fuel-dependent, infinite-growth imperative and save the planet.
From my perspective, an ETM movement could focus on types of money that can be issued into circulation without incurring debt. It could be a new currency, or governments could directly spend it into circulation without the need for interest to be paid back to private banks.
There are many ways to do this.
UC Irvine philosophy professor Aaron James and financial law expert Robert Hockett of Cornell University describe ways to make the money system better reflect that it really is a Commons in their book Money From Nothing.
Author Peter Barnes, in his book Ours: The Case for Universal Property, calls broad-based, Commons-oriented strategies to pre-distribute or re-distribute money to more people “Universal Money Pumps.” Some examples include:
- Funding a universal basic income debt-free
- Cap & Share on the atmospheric commons (or other natural resource commons) – FEASTA’s proposal for this, CapGlobalCarbon, uses an upstream cap and sends the money back to people as a climate dividend
- Fees on the speculative financial casino (the Tobin Tax) with funds returned to households
Alves’ work lists several core design elements and the need to address detrimental processes of the current monetary system and mentions:
- The ‘Green Quantitative Easing’ campaign (QE for the People – where the Federal Reserve’s stimulus of the economy goes to people, not to financial firms and Wall Street),
- Encouraging the greening of Central Banks (starting by not funding fossil fuels anymore)
- Impact currencies and complementary currencies designed to reward sustainable lifestyles and behaviors
- Developments in energy currencies, carbon currencies and emission reduction (which would include Douthwaite’s Energy Backed Currency Unit (ebcu)
No one is expecting those more radical proposals to be implemented any time soon, but perhaps some interim steps would be setting up public banking (Professor Morgan Ricks calls these “Fed Accounts”). Fed Accounts would allow people to have bank accounts at the Federal Reserve instead of at commercial banks, and is a step toward public banking, which eventually could lead to public acceptance of debt-free money.
Finally, we get to the debt ceiling, the original “teachable moment”/nonsensical crisis. It could be defused quickly by issuing a Trillion Dollar Coin. But this would tread on the “don’t look behind the curtain” policies that favor the 1%. I would be shocked if the Biden Administration is able to stare the Global Monetocracy in the eye and #mintthecoin (a courageous reading of the 14th Amendment or issuing premium bonds is looking to be more in the realm of the possible).
But let’s not squander a good crisis. The Biden Administration could appoint a committee to look into ecological and monetary reforms such as those listed above. They could tie it to the Well Being Economy and the move away from GDP-worship. Ireland’s President Higgins recently gave a speech in that vein, setting off a national debate that FEASTA hopes to be part of. On his recent visit to Ireland, President Biden said he felt like he was “home.” By giving a speech like President Higgins just gave, and setting up an Ecological Monetary Reform Study Committee, he could prove it.
Bank run: National Archives Photo, Public domain, via Wikimedia Commons
Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members.
Mike Sandler is the current Chair of FEASTA’s Board of Directors and is a climate change and sustainability professional with experience working for nonprofits and government. In 2001 Mike co-founded the Center for Climate Protection based in Sonoma County, California. Inspired by Peter Barnes and Richard Douthwaite, he has advocated for revenues from a price on carbon to be returned back to the public as a per capita dividend or share. He actively promotes CapGlobalCarbon and he has written on green monetary reform and basic income, some of which is archived on his author page on HuffPost.