The Future of Money

THE FUTURE OF MONEY Bernard A. Lietaer About the Author Bernard Lietaer had thirty years of professional experiences, which tend to mutually exclude each other, such as central banker and general manager of currency funds; senior consultant to both multinational corporations and developing countries; university professor and top executive of electronic payment systems. As a senior central bank executive in Belgium he was closely involved in the design and implementation of the ECU, the convergence mechanism which led to the European single currency. He was subsequently identified by Business Week as the world's top currency trader, while General Manager of the most successful offshore currency fund (1987-91). He was a professional consultant for over a dozen years to multinational corporations on four continents; and moved to the other end of the spectrum by advising developing countries in Latin America on how to optimise hard currency earnings. He was a Professor of International Finance; and also President of the most comprehensive and cost-effective electronic payment system in the world. During the course of his career, he has anticipated major monetary changes. His first book prepared the tools to manage currencies in floating exchanges, which occurred two years later. Another of his books was the first to announce the Latin American debt crisis of the 1980s2. He wrote The Future of Money while a Fellow at the Centre for Sustainable Resources at the University of California at Berkeley and Visiting Professor at Sonoma State University, California. This book is unique in that it integrates the author's varied professional perspectives into a coherent view on money. The Future of Money and its sequel The Mystery of Money are the basis of an international television series currently in production. More information and direct contact for answers to your questions are available in an on-line 'Money Conference' on www.futuremoney.net and on www.transaction.net/moneyl Preface Deep in our hearts, we all want to leave a better world for our children and we cherish the hope that we may experience this for ourselves in our own lifetime. However, there is growing concern that many of the challenges we now face are unrelenting and more and more people question our ability to address them effectively. Indeed, despite some breakthroughs and the valiant efforts in the public and private sectors, the challenges to our planet and society are growing both in scope and severity with each passing decade. In this new Millennium, we are being challenged by four megatrends that are converging upon us over the next twenty years, namely: *Climate change and loss of biodiversity; *An unprecedented growth in the number of elderly (the 'Age Wave'); *Monetary Instability; * and an Information Revolution. (The evidence for each one of these megatrends and for the collective breakdowns they will provoke are described in Chapter 1.) Why is this? Why have our efforts, the countless billions of pounds and dollars spent all over the world, the many treaties enacted and initiatives taken, not stopped the destruction of our environment, nor effectively addressed a myriad of social issues? Is it possible that our attentions and efforts are misdirected? Or are the challenges and issues facing our world today being fuelled by an even deeper systematic problem? The short answer to this last question is yes. The Future of Money is a compendium report about solutions already implemented by thousands of people around the world, who have had the courage to first identify, then directly address the underlying mechanism of their problems. Their initiatives to date are small-scale, but I see them as seedlings which - if allowed to grow - have the potential to provide effective and permanent solutions by which conditions for mankind and other living systems may improve dramatically within our own lifetimes. The underlying mechanisms referred to here turn out to be specific features of our money system. Money or lack thereof, is a fundamental component of our lives. It is not, however, just the lack of money that is precipitating present trends or preventing us from addressing current challenges. Rather, it is the limited functionality of our money and monetary system that is a major force behind our present disorders. Many of the problems we face, and the solutions we seek, reside within the architecture of our current monetary system and in our understanding of, and our agreements around, money. Fish to do not comprehend the nature of the water in which they live. Similarly, people have trouble understanding the nature of money. We allocate a great portion of our physical, emotional, and mental energy to getting, keeping, and spending money - but how many of us really know what money is or where it comes from? In pre-Victorian England the world was oblivious of pollution, greenhouse effects and overpopulation. Nationalism, competition, endless growth and colonisation were encouraged. These values are what shaped the monetary and banking systems we inherited. However, is this what best serves our world today? I submit that those aspects of our monetary system that met the objectives of another time and age are now inadequate for the challenges facing us during an Information Age. This is particularly true in light of the fact that working solutions are already underway, with thousands of communities around the world taking their own money initiatives. They are creating new wealth, while solving social problems without taxation or regulation. They are empowering self-organising communities, while increasing overall economic and social stability. Finally, they enable the creation of very necessary social capital without attaching the established capital formation process. Many attempts at money reform have failed in the past, because they were trying to attach or radically change the official money system itself. There are three reasons why I believe the current, on- going monetary initiatives have a better chance of success than ever before: First and foremost, these money innovations are not attacking the official money system. What they do instead is complement the conventional money system, providing new tools that can operate in parallel with it, without replacing it. That is why I call them 'complementary currencies', and not, 'alternative' ones. The second reason is that they have already proven to be capable of addressing breakdowns of a new nature to which no solutions have been forthcoming within the conventional money paradigm. Finally, the availability of information technologies necessary to implement new money systems has become universal enough that a democratisation of money innovations has become reality. My career has taken me to the Four Corners of the earth, where I have witnessed extremely different worlds ranging from dire poverty and hunger to opulence and extravagance. Writing this book has, therefore, not been a cool, abstract intellectual exercise. Rather, it is an exploration into a deeper meaning of money. Money not only permeates every facet of our lives, but is also hot- wired to our sensibilities. Thus I too have run through a whole gamut of emotions, playing and working with money both on a personal and professional level. While I have learned to deal with money from a professional, hyper-rational distance, I have also personally experienced extraordinary highs along with moments of bitter humiliation and bewilderment. The low of my currency trading days was when I became caught in the ebb-tide of George Sores' cornering of the Pound Sterling in the early 1990s. This instantaneously shattered my professional reputation as the 'world's top currency trader'. I lost the illusion of my own Midas touch and most of my own money as well. Perhaps the most salient outcome of my experiences with money has been a broader, more grounded view of its worth to us as human beings and its potential pitfalls. Money not only has the potential to contribute to global abundance, sustainability, and peace of mind if used wisely; but when restricted in its flow it also has the ability to engender unfathomable suffering and hardship. It is from this multi- ocular perspective that I am synthesising here what I have learned so far about this mysterious thing called money. This is not a book on economics or economic theory. I am not an economist. My expertise lies in international finance and money systems. This is why I have adopted here a whole systems approach to money. Whole systems take into account a broader, more comprehensive arena than economics does; it integrates not only economic interactions but also their most important side effects. This includes specifically in our case the effects of different money systems on the quality of human interactions, on society at large, and on ecological systems. In essence, money is a lifeblood flowing through ourselves, our society, our global human community, and should be acknowledged and treated consciously. Part One of The Future of Money elucidates the mysteries of the current official currency system. Part Two widens the view to encompass and feature newly emerging money systems. Therefore, this book deals with money in the world outside of us, describing how different money systems shape society. The forthcoming Mystery of Money ; Beyond Greed and Scarcity completes our examination of money by delving into the world residing inside our own heads. It thereby steps up the scope of our money landscape one last notch by exploring the world of the collective psychology of money and of the emotions triggered by different money systems. Stories There will also be stories mat take many forms, from totally real to quite imaginary. Although they make a point where they appear, they can also stand-alone. Invitation Finally, I would like to thank everyone from almost every country in the world, who has contributed, knowingly and unknowingly, to my grand tour of duty in money systems.

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