Money is the missing link in designing a dynamic post fossil fuel economy. Creating money as interest bearing debt builds in a growth imperative. Dual currencies in history can be repeated with success now.

1. DEIRDRE KENT NOVEMBER 25, 2020
Money and sustainability
Money is the missing link in designing a
dynamic post fossil fuel economy

2. • Money is rarely mentioned in
sustainability discussions.
• We don’t know where money originates
or what gives it value.
• We assume money is neutral.
We blank out when people talk
about money systems.

3. Club of Rome Report
2012
Bernard Lietaer, Christian Arnsperger,
Sally Goerner and Stefan Brunnhuber
• Foreword by Dennis Meadows says the
deadly effects of the financial system are
becoming more apparent.
• Authors says money is not neutral but
minor changes could lead to
sustainability.
• They list five ways the money system is
not compatible with sustainability.
•A Club of Rome Report 2012 by Bernard Lietaer, Sally Go

4. Naomi Klein quote
"Our economic system and our
planetary system are now at war. Or,
more accurately, our economy is at war
with many forms of life on earth,
including human life.”

5. What do money
systems have to do
with sustainability?
• We can’t have sustainability in the current
financial system because it has a built-in growth
imperative.
• The growth imperative forces deforestation, more
mining, more fossil fuel use, more material
throughput, more agribusiness.
• Climate action impossible with the current
financial situation.

6. • When money is created as interest bearing debt, the bank creates the deposit but not the interest.
• So the borrower has to compete with everyone else to find the money to pay the interest.
• There isn’t enough money in the economy for everyone to find the interest. There are winners
and losers.
• So someone has to go into more debt and when they do the money supply increases..
• But all the money must be used in commerce or there is inflation. So money is spent on more
resources from nature, buying up more land to develop, using more fossil fuels.
How is compulsory growth built-in?

7. Kereru, black stilt and little penguin in trouble

8. One effect of the
growth imperative
is deforestation for
palm oil to feed
livestock.

9. Charles Eisenstein in his book Sacred Economics
“Looking out open the strip mines and the
clear-cuts and the dead zones and the
genocides and the debased consumer
culture we ask, What is the origin of this
monstrous machine that chews up beauty
and spits out money?”

10. When money is created as
interest bearing debt
1. It causes boom and bust cycles in the economy
2. It produces short term thinking
3. It requires unending growth
4. It contributes to wealth concentration
5. It destroys social capital

11. • Economic growth strongly correlated with increasing energy use.
• The energy used to get fossil fuels is increasing, leaving less energy for the economy.
• With deep sea oil and fracking the EROEI (Energy Returned on Energy Invested) is
declining.
Economic Growth needs Energy

12. But renewable energy is still minor

14. Conclusion –a
managed energy
descent is the path
to follow!

15. • The Reserve Bank responded by creating new money to buy up Government Bonds. An agency
of Government, our central bank, has the power to create money.
• On TVOne John Campbell (19 May 2020) asked the Chief Economist of the Reserve Bank “Who
gave them permission to print money?” The answer was, “The Government did. It’s our
superpower if you like.” https://www.youtube.com/watch?v=DJQgt5du66w
• Government is a currency issuer.
• Of course it must stop if there is any sign of inflation.
an agency of government has the power to create money. Government is a currency issuer. Of course it must stop if there is
The Covid-19
effect

16. • The Bank of England published a paper by
Zoltan Jakab and Michael Kumhof with this title
(26 Oct 2018)
• Michael Kumhof worked for IMF before that and
held a seminar where he said, “It is not
granny’s money that you borrow. It is brand
new money.” He is a former bank manager.
Banks are not intermediaries of
loanable funds – fact, theory and
evidence

17. •The Reserve Bank has the sole right to issue currency (Clause 25
(1) of the Reserve Bank Act 1989)
•As well as the other functions of the Reserve Bank, it enforces this
currency monopoly.
•Clause 29(1) says No person shall make or issue any bank note
or coin, other than a bank note or coin issued under this Act.
•They stopped the Chatham Islands currency in 2003 when they
were used for payment.
The Reserve Bank has the sole right to issue
currency

18. Local government is
at a disadvantage
• Government is a currency issuer
so it can spend more money than
it has revenue (run a deficit)
• But local governments have to
balance their books.
• Auckland Council is in trouble and
has had to cut services and fire
staff.

19. • Currently some of our currency is spent into existence by the Reserve Bank.
• But most of it is lent into existence by private banks with interest, bringing five detrimental effects.
Banks have special privileges granted by government (never mentioned)
• A monopoly currency gives efficiency but no resilience. The financial system is still fundamentally
unstable and has a growth imperative.
• An ecology of currencies is the answer. Currencies can be issued by local authorities (a precedent
is in Wørgl Austria in 1932), by groups of businesses (WIR in Switzerland), by businesses (in the
Depression United Farmers had a 20 shilling coin) or by organisations (e.g. Timebank, Lyttelton)
If a monopoly currency is not the answer, what
is?

20. • Communities start a variety of
complementary currencies and manage
them well and keep up the volunteer energy
so well that local bodies recognise their
value. These will include currencies with a
sizeable circulation incentive.
• The Christchurch City Council as a member
of Lyttelton Time Bank accepts Hours for
payments for things like dog licences or tip
fees.
Possible pathways to
sustainability

21. • Businesses could study what happened
in Switzerland with the WIR.
• Promote SOSbusiness vouchers and
issue them in denominations. They can
be used for payment to any
SOSbusiness.
• Others modify Bartercard etc. Or a
power company could issue a currency
with a circulation incentive like in
Germany in 1920s.
• Councils start learning about what
happened in Wørgl, Austria in the Great
Depression.
What businesses can do

22. • Existed for sixteen centuries in Egypt up to 30BC
• When a farmer brought ten bags of wheat to
storehouse he got a receipt on a pottery shard
(ostraca), telling the date it was left and how much was
left.
• When he came back after a year he received only nine
bags. This was a circulation incentive for these ostraca.
• The result was a civilisation where food was plentiful,
waterwheels were maintained well, there was an
educated workforce, there were up to 170 holidays a
year in some districts, status of women was high.
Dual currency in Egypt <
30BC

23. Bracteates in Central Middle
Ages
• In European towns between 1150 and 1290, the local noble or bishop
issued thin silver and gold coins for money. When the noble died, the
next one called in all the coins and reminted them even thinner.
• The result was they had compulsion to spend – a circulation incentive.
• Villagers spent their money on goods that would last, focussing on
durability and long term thinking.
• With excess money they joined together and built cathedrals that would
bring pilgrims and money for the village.
• This was the period of great cathedral building, advances in
engineering, science, astronomy, mathematics, art and medicine.

24. ‘Only money that goes out of date like a
newspaper, rots like potatoes, rusts like
iron, evaporates like ether, is capable of
standing the test as an instrument for the
exchange of potatoes, newspapers, iron
and ether…Money is an instrument of
exchange and nothing else. Its function is
to facilitate the exchange of goods….’
Silvio Gesell’s influence

25. • In 1932 the town of 5000 had 30% unemployment.
• The Mayor had read Silvio Gesell who said money should be only a means of exchange.
• They put 20,000 schillings in bank as backing for new perishable currency, Labour Certificates
• They paid employees partly in Labour Certificates. Each month the holder of note had to buy a
stamp worth 1% of the value of note and stick it on the back to make the note valid. This acted as
circulation incentive.
• Result. Velocity of money circulation increased. People paid taxes early and the town built a
bridge, a ski jump, a reservoir and they fixed up roads.
• Unemployment dropped but after 15 mths the central bank stopped the experiment.
The Miracle of
Wørgl

26. Yang coherence Yin coherence
Transcendent God
Pursuit of certainty
Central authority
Hierarchy works best
Competition
Rational, analytical
Logic, linear, mental
Cause and effect
Parts explain whole = reductionism
Bigger is better
Technology dominates
Imminent divinity
Ability to hold ambivalence
Mutual trust
Egalitarian works best
Cooperation
Intuition, empathy
Paradox, physical-emotional, non-linear
Synchronicity
Whole explains part =holism
Small is beautiful
Interpersonal skills dominate
Lietaer’s theory of why dual currencies work

27. A council-created
Wørgl- like currency
would lead to:-
More upgrades of houses
Earlier payment of rates
Excess money going into paying carers
Excess money starting businesses
Import replaced by locally sourced
materials
Less transport
More cooperative businesses

28. • Scarcity of money supply leads to
low wages.
• Abundance of money means a win-
win for employers and employees.
Employers/Workers Win-win?
• We are apparently dependent on
immigrant apple pickers because
of low wages

30. • No matter how good your currency system is, there are dangers if the tax system is wrong.
• New money MUST NOT go into buying land, or the natural resources that land provides. That
leads to asset price inflation. Rivers will be dammed and native forests felled.
• So the government must change its tax system, taxing land rather than labour.
• A land tax is effective, efficient, has no distortions and is intergenerational equitable.
• Resource taxes are essential.
Successful dual currencies have coexisted with
land rents

31. We need an economy
that is both efficient and
resilient
You can’t get this with monoculture of a single currency and so much
centralisation.

32. We need both good
localisation and
good centralisation.
The model is nature. Take the human body for example. Biomimicry in economic
structure.

33. DEIRDRE KENT, 25 NOVEMBER, 2020
• Living Economies Educational Trust living economies.nz.
• https://www.facebook.com/livingeconomies/
• deirdre.kent@gmail.com
• Deirdre Kent 021 728 852
• Books by Bernard Lietaer, Silvio Gesell, Richard Douthwaite, Margrit Kennedy, Tom Greco etc
• Reading http://neweconomics.net.nz
Resources