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Roundtable on Money
An exchange on Money for the People

Mary Sue Schmaltz


Mary Mellor’s exploration of the nature of money and its role in the diminishment of socially and environmentally relevant values is well taken. Active participation from local, regional, and national governments will be imperative to any endeavor to transform monetary structures. However, it need not be expressly a centralized governmental function.

Currency expert Bernard Lietaer has long argued that we could redesign our system of money in a manner that would be more socially beneficial if we were to shift the money “target” away from the competitive model towards more socially viable aims. Ultimately, Lietaer believes the answer lies in designing complementary forms of local currencies to work in tandem with our conventional currency systems. Lietaer also introduced the idea of a global currency called the Terra, which would be comprised of a combination of various commodities and international services. Creating a standardized basket of the prominent commodities and services, he believes, would incentivize long term thinking and would better stabilize the global business cycle as it would be more inflation-proof.

In line with Mellor’s idea of public money is the idea of utility banking. Banking expert Martin Mayer notes the significance of the fact that banks no longer act like social institutions rooted in their communities with direct relationships to their depositors and borrowers. Now banks are businesses who sell off their loans severing the relationship between borrower and lender while shifting risks onto the public. Suzanne McGee in her book Chasing Goldman Sachs likened the money grid to an electrical grid. Just as we have electric and water utilities, McGee proposes that we need a banking utility. When liquidity dries up, it can be just as devastating as a water or electrical shortage.1 Playing off the proposed public option for health care, Ellen Brown in her book Web of Debt suggests that we consider a public option in banking. Instead of taking profits out of the community system, the public banking system would be better positioned to reinvest in the community. An example of such a successful regional bank already exists—the Bank of North Dakota, which is owned by the state.2

It is vital that we directly address not just the creation and control of the currency itself, but the whole system of money and finance—including accounting rules, taxation, regulations and other metrics which incentivize or discourage certain types of activities. Rana Foroohar, in her book Makers and Takers: The Rise of Finance and the Fall of American Business, does a great job of examining how the incremental rise of hyper-financialization and commodification have diverted resources away from activities that promote overall well-being.3

Former British banking regulator and chairman of the Institute of New Economic Thinking Adair Turner, in his book Between Debt and the Devil, notes that a mere 15% of the global financial flows are applied to the real productive economy. The rest relates to fabricated values derived from financial engineering and manipulations, divorced from the real productive economy of products and services.4 These values are truly representative of the “something from nothing” to which Mellor refers. It’s not just that financial values are widely disconnected from human and ecological values. These values are not even in line with sound economic values. When companies such as Apple borrow funds to buy back shares in order to artificially prop up their share prices rather than innovate, the distortion becomes obvious.

Exacerbating the distancing of economic values from life-affirming values is the fact that finance today is driven by complex algorithms. Quantitative expert Paul Wilmott has been sounding the alarm loudly about the role of complex algorithms in financial risk and value distortion. He explains, “If you used the wrong model to design airplanes, you’d kill passengers and end up in prison. But do the people using financial risk models care what happens? Of course they don’t.” Value at Risk, the dominant risk measurement used by the financial industry, certainly proved fatal to global financial health leading up to the financial crisis of 2008. Skewed financial modeling is still the driving force of economic values.

We also need to be careful not to simply monetize certain altruistic or caring activities. Technology exists today for exchange systems that make it possible to maintain the integrity of such activities. For example, BiologicTx has developed a kidney transplant chain, whereby the system identifies willing donors to compatible matches without financial gain. Say a person needs a kidney transplant and a loved one would readily offer one of their kidneys, but they are found to be biologically incompatible. The altruistic intent remains intact to mutual benefit as the willing donor is still giving a kidney to get a kidney for their intended recipient. As we struggle with financing the needs of our aging populations, we might consider a Japanese approach known as the fureai kippu, which roughly translates into “caring relationship voucher.” People volunteer as caregivers to the elderly and receive credits.

All in all, I very much appreciated Mary Mellor’s paper. It offers a great starting point for delving deeper into discussions about the monetary system. How do we connect people to services and products? How do we preserve the quality and create universal access to life-giving resources? What will be the new nature of livelihoods and market participation in this era of automation and worker obsolescence? We can begin by linking financial values to real life on the ground. Local circles of economic activity should be nested within the global system, not smashed down by the top-heavy nature of our dominant money systems.


Endnotes

1. Suzanne McGee, Chasing Goldman Sachs (New York: Crown Publishing Group, 2010).
2. Ellen Brown, Web of Debt: The Shocking Truth about Our Money System and How We Can Break Free, 5th revised ed. (Baton Rouge, LA: Third Millennium Press, 2012).
3. Rana Foroohar, Makers and Takers: The Rise of Finance and the Fall of American Business (New York: Crown Publishing Group, 2016).
4. Adair Turner, Between Debt and the Devil: Money, Credit, and Fixing Global Finance (Princeton, NJ: Princeton University Press, 2015).


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Mary Sue Schmaltz
Mary Sue Schmaltz worked in various New York–based financial institutions in the area of global institutional investments and is now actively engaged in promoting new economic and business models that prioritize quality of life. She writes on socioeconomic issues with a focus on the core systemic impediments to socially responsive economic practices and well-functioning financial markets.



Cite as Mary Sue Schmaltz, "Contribution to 'Roundtable on Money,'" Great Transition Initiative (August 2017), http://www.greattransition.org/roundtable/money-mary-sue-schmaltz.




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