C H A P T E R 5

Monetary Reform in the Context of Global Transformation: An Example of How to Make the Change

THE FACT THAT this book concentrates on the issue of monetary reform as one important aspect of the total global transformation which we are about to witness does not mean that it is more important than other aspects. From organizational to individual transformation, from technological to spiritual transformation, we need change.

Money, how it works and what it does to society, has been notoriously overlooked although it seems to be a fairly central piece of the puzzle. Neither experts nor those who occupy themselves with alternatives to the present econornic system seem to worry much about this issue. It may not be more important but it certainly is not less important than others. It simply affects everybody.

REPLACING REVOLUTION WITH EVOLUTION

While the three reforms - in money, land and tax systems - proposed in this book constitute only a small part of the overall changes that are necessary for survival on this planet, they may fit readily into many attempts to create a new relationship between human beings and nature - and human beings and their fellow human beings. Social justice, ecological survival and freedom are threatened where we allow the proliferation of societal structures which in themselves tend to work against these gouls.

The proposed reforms clearly combine the advantages of both capitalism and communism. They avoid their respective shortcomings and provide a "third type of solution." They would allow individual freedom and growth together with a free market system, and with a far greater degree of social equity. At the same time, they would stop the exploitation of the large majority by a small minority - without introducing the heavy regulations of a planned economy and an almighty bureaucracy.

The communist attempt to create freedom from exploitation failed because, in order to secure a minimum existence for everybody, communism eliminated personal freedom. The capitalist tendency, on the other hand, by letting land and capital be exploited in an unrestricted practice of personal freedom has endangered the minimum existence of the majority of people. Both systems have gone too far in their respective directions. One has set the priority of freedom from hunger above freedom to choose one's own life style. The other has set the top priority on personal freedom which, in the present monetary system, can only be achieved by very few people. Both are partially right, but both have failed to create the preconditions for a genuinely human existence including genuine freedom.

The reforms proposed here could reduce governmental intervention and create an ecological economy in which goods and services could be produced at an optimum size and level of complexity because that is where they would be the cheapest, i.e., most competitive in a free system.

While the full extent to which wealth is redistributed through the monetary and land systems is less obvious in highly industrialized countries, because of the exploitation of developing countries, the working people in the latter really pay the price for the monetary systems of the industrialized world. Although they suffer most, there is little hope that these ideas will be used first in the Third World where small elite groups dominate in terms of money, land and political power. However, there may be a possibility for change in the smaller democratic nations of Europe. Scandinavia, for instance, with a majority of wealthy and well educated people, might prove comparatively well open to social change. And this is what monetary reform is all about. At the U.N. World Commissions Public Hearing in Moscow on December 11, 1986, A. S. Timoschenko of the Institute of State and Law, U.S.S.R. Academy of Sciences, proposed that:

"Today we cannot secure security for one state at the ex- pense of the other. Security can only be universal, but secu- rity cannot only be political or military, it must be as well ecological, economical and social. It must ensure the fulfillment of the aspirations of humanity as a whole." (32) The struggle of humankind for social and economic justice has been long and fierce. It has created sharp divisions in political orientations and religious beliefs. It has cost many lives. It is indeed urgent that we come to the understanding that nobody can obtain security for oneself at the expense of another, or at the expense of the environment on which we depend. In order to make this feasible we need some deep and practical changes in the structures of our social framework. Hopefully the changes proposed in this book will contribute to the creation of security and justice for people and our global environment, and finally begin to replace revolution with evolution.

A POSSIBLE SOLUTION FOR THE NEAR FUTURE

Before the money system could be reformed, a large section of the population must realize that we have to limit money to its functions as an exchange medium, as a scale for prices and as a constant standard of value. If this recognition is transformed into political action, then the central bank, as directed by the government, would employ a parking fee rather than interest to keep money in circulation.

Figure 18

THE PARKING FEE CREATES A NEUTRAL MONEY SYSTEM

As a method to secure circulation, the parking fee would make possible all necessary transactions. If there is enough money available to accomplish all necessary transactions, then it is not necessary to put more into circulation. Hereby, the growth of the amount of money available follows the growth of the economy and this follows, once again, the natural growth curve (curve in Figure 1).

If somebody has more cash than they need, at any time, they pay it into their bank. Depending on the length of time the money is deposited, the parking fee will be either diminished or waived. Figure 18 shows how today's interest scale would be replaced by a parking fee scale. In the case of long term deposits there would be no fee; cash would have the highest fee.

The hoarding of cash in the new system could be avoided much more easily than by gluing a stamp on the back of a banknote as was done in Wörgl. Several suggestions have been made: One is a lottery system. It would ensure the circulation of cash by the withdrawal of one specific note denomination, in the same way as a lottery draw.

Based on today's eight denominations (in the case of the German Mark DM 5/10/50/100/200/500/1000), e.g., the eight coloured balls representing different bank note denominations would be mixed with white balls representing no conversion in such a way that on statistical average - a conversion of one denomination would occur once or twice per year.

Draws could take place, for example, on the first Saturday of each month. Once a denomination is drawn, the conversion period could go on until the end of the month. The drawn notes would remain legal tender and could be used for payment in all shops. However, the respective fee would have to be deducted these bank notes.

Another option is to exchange the invalid notes against payment of the exchange fee at a bank or post office. Because no one likes to pay fees, everyone would limit their use of cash to the necessary amount, and surplus money would be paid into bank accounts.

The exchange would be facilitated by giving the new note denominations a new colour and size. New DM 100 yellow notes replace the old blue notes which go out of circulation. The concealment of overdue notes can be avoided by making the new notes slightly longer or wider so that every false note would jut out of a bundle, no matter how thick.

Unlike stickers, or stamp money, the drawing of denominations has the advantage that there is no need to print new money. We could keep the same money we have today and the actual cost of the system would be no higher than the replacement of worn out notes today.

In this new neutral money system, banks are under the same obligation as everybody else to pass the money on to those who need it. If they have interest free deposits on their books, and don't lend the money out or transfer it to the central or regional bank, they would also have to pay the parking fee. People receiving a credit would pay no interest but banking charges and risk premiums, comparable to those included in every bank loan. The two amount to about 2.5% (1991 in Germany) of the average credit costs (see Figure 18). In Switzerland, they only amounted to about 1.5% of the average credit costs. In industrially developing countries, they were even two to three times as high.