AMI Conference Statement to COP28

To: The participants of the UN Climate Conference’s COP28

Re: The Monetary Dimension of Environmental Degradation

From: The American Monetary Institute, other civic organizations, and concerned individuals

Date: November 6, 2023

Dear participants,

This is a timely and urgent message to all of you who are concerned about the causes and solutions of climate change.

We are a group of concerned citizens–including academics, experts and activists–who have delved into the current, global monetary system and its problematic impact on society and the environment.

We were gathered at the 19th Monetary Reform Conference organized by the American Monetary Institute, in which context we have formulated this letter.

If you, as an individual or as an authorized representative of your organization, want to support this statement, please add your signature here.

Our concise statement with ample background references is the following:

We acknowledge there exists a strong correlation between the current, debt-based monetary system [ⁱ,ⁱⁱ] and environmental degradation, including climate change. It acts through multiple paths of transmission [ⁱⁱⁱ,^iv,^v,^vi], which have to be taken into account to find just and sustainable solutions.

The current monetary system is a debt-based system, because most of the money used for economic transactions, both in the real economy and the Finance, Insurance and Real Estate (FIRE) sector [^vii], is generated through the creation of debt when banks extend loans [^viii,^ix]. This system is also a major cause of destructive economic boom and bust cycles, and creates socioeconomic inequality and political polarisation between and within creditor and a debtor classes [^x].

Furthermore, we strongly believe that sovereign monetary reform (SMR)[^xi,^xii,^xiii] will allow substantial public investments, which are required [^xiv,^xv] to steer global civilization [^xvi] from our brown, carbon-based age to a green, equitable, post- fossil fuel age [^xvii] with a balanced carbon cycle [^xviii].

In the case of the USA, SMR would entail the three following inter-connected changes to its current design:

• Requires Congress to be the sole creator of all U.S. money debt-free, as authorized in the U.S. Constitution [^xix];
• Ends the privilege of commercial banks to create money; and
• Makes all remaining operations of the Federal Reserve System accountable to the public [^xx].

At an international level parallel institutions and regulations should be developed including: 1) a supranational reserve currency; 2) an international clearing system [^xxi]; 3) a monetary authority of currency issuance [^xxii]; and 4) an advisory Intergovernmental Panel on Economic and Social Issues (IPESI) to assess progress and detect problems [^xxiii].

Given the promising nature of SMR, we, the undersigned, therefore call for a UN Monetary Commission to investigate the strengths and weaknesses of the current monetary system, and to evaluate alternate proposals, especially SMR, to improve it [^xxiv,^xxv,^xxvi].

Link to Endnotes further down.

We invite you to become familiar with this line of analysis and, based on it, our policy proposal, to which we hope you will give due attention.

 Signed,

ORGANIZATIONS

• American Monetary Institute (USA)
• International Movement For Monetary Reform (International)
• Money Reforms India (India)
• Prout Alliance (USA)
• The Phoenix Group (USA)
• Greyscale Group (USA)
• The Center for Social Sustainable Systems (USA)
• Alliance For Just Money (USA)
• Maryland Green Party (USA)
• Banking and Monetary Reform Committee of Green Party of the United States (USA) 
• Divest Washington (USA)
• Global Carbon Reward (Australia)
• Community Homesteading Project (Philippines)
• Just Abundance, Inc. (USA)
• Kootenay Freedom (Canada)
• Phoenix Finance (USA)
• Women’s International League for Peace and Freedom, Santa Cruz (USA)
• Green Party (USA)
• Mother Pelican Journal (USA)
• CoGro CoOp (USA)
• ProVollgeld Austria (Europe)
• Community Innovation Organization (Nepal)
• Solidarity for Monetary Democracy (South Korea)
• Talousdemokratia ry (Economic Democracy Finland)
• Project Group RealniDenar (Slovenia)

INDIVIDUALS

• Steven Walsh, Executive Director AMI
• Nick Egnatz, Trustee AMI, author of People, Planet and the Power of Money
• Govert Schuller, AMI
• Lucille Eckrich, Associate Professor emeritus, ISU; Board member and treasurer, AFJM.
• Fernanda Lugo
• Frans Verhagen, USA
• Joe Polito, CFO, Kingsway Humber Kiwanis, Canada
• Greg Coleridge, USA
• Alfonso Saldaña, USA
• Mike Purdy, Professor Emeritus, State U. of IL, Governors State, USA
• Sumal Raj, Er., Money Reforms India
• Mac Rudolf Khyllem, North Eastern Hills University, India
• Michael K.C. Thanga, India
• Luciano Difeo, Argentina
• Howard Switzer, USA
• Jim Becklund. USA
• Howard Switzer, USA
• Eugene Woloszyn, USA
• John Anthony La Pietra, USA
• Thomas J Wilda, AFJM
• Diana Schumacher, UK
• Dave Lowe, Canada
• Michael L Wilson, USA
• Manuel José Espinosa, Principal the Phoenix Group
• Dr. Delton B. Chen, Project Director, Global Carbon Reward
• Josiah Moss, USA
• Russell Cohn, USA
• Peter Judd, New Zealand
• Aristomenis Tragoustis, Greece
• Johan Zijlstra, The Netherlands
• Lila Walsh, USA
• John N Howell, Associate Professor of Physiology Emeritus, Ohio University; AFJM
• Mary Sanderson, USA
• Karina Ramirez, Diversity & Inclusion Director, Citizens’ Climate Lobby
• David Tame, UK
• Solemi Hernandez
• Mark Young, AFJM and IMMR
• David Madigan, UK
• Richard Powell, USA
• Liam Considine, USA
• Richard H. Robbins, Distinguished Teaching Professor Emeritus, State University of New York at Plattsburgh, USA
• David Orlikoff, USA
• John Lodenkamper, Quaker Institute for the Future, USA
• Timothy Havel, Massachusetts Public Bank Steering Committee, USA
• Jeffrey Juran, USA
• Steven Berge, USA
• Susan Heath, USA
• Janet Wilson, Professor at Illinois State University, USA
• Edward W Twohig, CPA, USA & Canada
• Thomas Wilda, USA
• Young Kim, South Korea
• Park Kihun, Republic of Korea
• Kevin Robinson-Hard, Sr. Project Engineer, USA
• Song, Jihyeon, Professor at Inje University, Republic of Korea
• Eun Kyung-Jang, Republic of Korea
• Peter Rudolph, USA
• Adrienne Rayna, USA
• Alex Myhr
• Rachel Dowty Beech, USA
• Laurel Farnham, USA
• Raymond Johnson, PhD Chemistry, USA

If you like to add your name please fill out this form.

Add, if you like, town, state & country, institutional affiliation and any titles.

The Press release by AMI you can read here.

For questions email Steven Walsh or Govert Schuller.

ENDNOTES

i. The current monetary system is a debt-based system, because most of the money used for economic transactions in the real economy is generated through the creation of debt when banks extend loans. In the words of Richard Robbins (2014):

We generally assume that governments create money by printing it. And, in fact, when money was linked to gold, there was a limit on how much could be printed. However, with the lifting of these restrictions, most money is now created by banks and other lending institutions through debt. We generally assume, also, that the money that banks lend is money that others have deposited. However, that is not the case; only a fraction of the money that banks lend needs to be in deposits. In effect, whenever a bank lends money, or whenever a product or service is purchased on credit, money has been created.

Robbins, Richard H. 2014 (1999). Global Problems and the Culture of Capitalism. 6th Edition. New York: Pearson/Allyn & Bacon. Page 88.

ii. Richard Werner (2016) describes the credit creation theory of banking as follows:

. . . each bank is said to create credit and money out of nothing whenever it executes bank loan contracts or purchases assets. So banks do not need to first gather deposits or reserves to lend. Since bank lending is said to create new credit and deposit money, an increase in total balances takes place without a commensurate decrease elsewhere.

Werner, Richard A. 2016. “A lost century in economics: Three theories of banking and the conclusive evidence”. International Review of Financial Analysis, 46 (July 2016): 361-379.

iii. Richard Robbins (2014) has indicated multiple lines of transmission between the CMS and its effects on the environment. For example the culture of capitalism has made the average citizen into an avid consumer.

Our consumption of goods obviously is a function of our culture. Only by producing and selling things and services does capitalism in its present form work, and the more that is produced and the more that is purchased the more we have progress and prosperity. The single most important measure of economic growth is, after all, the gross national product (GNP), the sum total of goods and services produced by a given society in a given year. It is a measure of the success of a consumer society, obviously, to consume. The production, processing, and consumption of commodities, however, require the extraction and use of natural resources (wood, ore, fossil fuels, and water) and require the creation of factories and factory complexes, which create toxic by-products, whereas the use of commodities themselves (e.g., automobiles) creates pollutants and waste. Yet, of the three factors to which environmentalists often point as responsible for environmental pollution—population, technology, and consumption—consumption seems to get the least attention.

Robbins, Richard H. 2014 (1999). Global Problems and the Culture of Capitalism. 6th Edition. New York: Pearson/Allyn & Bacon. Page 198.

iv. Peter Dietsch (forthcoming) highlights one large causal component of banking practices affecting the environment.

No matter how hard we work, we will never succeed in achieving a green transition by shifting existing money to green sectors as long as banks, supported by their central banks, can create an unlimited flow of new money for profitable fossil fuel industries. (underlining added)

Dietsch, Peter. “The climate risks of unconditional broad money”. Forthcoming.

See also: Dietsch, Peter. 2023. “Banks creating money — a serious climate threat?” Webinar with prof. Peter Dietsch at Positiva Pengar, Sweden, 21 Sept 2023.

v. What could help to more precisely fill out the picture of the environmental impact of financial institutions (i.e. their externalities) would be the concept of ‘double materiality’, i.e. the mandatory reporting about externalities which should impact their market value. Not unlike the mandate for companies in the US to produce an Environmental Impact Study (EIS) before starting their activities.

Double materiality describes how corporate information can be important both for its implications about a firm’s financial value, and about a firm’s impact on the world at large – particularly with regard to climate change and other environmental impacts.

The principle of double materiality is set to be integrated into national and international reporting standards, with potentially significant consequences. The ability of the financial system to support the shift to a net-zero economy depends on investors, regulators and other stakeholders having access to high quality information about firms’ climate impacts. The adoption of double materiality could be key to this process.

Clarke, David. “What is double materiality and what does it mean for central banks?” Green Central Banking, 28 Feb 2022.

vi. Another chain of transmission is the ‘tyrannical’ expectation for the highest rate of return on debt-based investments regardless of the environmental, political or social damage that may result. Multiple strategies are pursued by businesses to lower costs. The scrapping or evasion of the regulations ruling externalities, like the effect on the environment, is one of them.

The private sector spends billions of dollars a year on lobbying efforts, campaign donations, and public relations in an effort to minimize the cost of government regulation. These efforts are often successful. After all, enforcement can be costly for government.

Attempts have been made to estimate the total externalized costs of doing business. The United Nations in 2010 came up with an annual figure of $2.2 trillion in environmental costs alone, or one-third of the annual profits of the 3,000 largest corporations in the world (Jowit 2010).

Robbins, Richard H. 2019. “Confronting the Tyranny of the Rate of Return“. Academia.edu. Pages 28-29.

Jowit, Juliette. 2010. “World’s Top Firms Cause $2.2tn of Environmental Damage, Report Estimates“. The Guardian, 18 Feb 2010.

vii. Bezemer & Hudson (2016) make the case that financial dynamics, especially when it comes to financial crises, can not be properly understood without a clear distinction between the productive sector and the Finance, Insurance and Real Estate (FIRE) sector.

The FIRE sector’s real estate, financial system, monopolies, and other rent-extracting “tollbooth” privileges are not valued in terms of their contribution to production or living standards, but by how much they can extract from the economy. By classical definition, these rentier payments are not technologically necessary for production, distribution, and consumption. They are not investments in the economy’s productive capacity, but extraction from the surplus it produces. (underlining substituted for italics in original)

Bezemer, Dirk & Hudson, Michael. 2016. “Finance is not the economy: Reviving the conceptual distinction”. Journal of Economic Issues, 50/3: 745-768. Page 758.

viii. Somewhat counter-intuitive is the reverse action when borrowers pay off the principal of their loans and money gets booked away, i.e. destroyed (or when banks sell assets like bonds).

Just as taking out a new loan creates money, the repayment of bank loans destroys money.

Banks making loans and consumers repaying them are the most significant ways in which bank deposits are created and destroyed in the modern economy. But they are far from the only ways. Deposit creation or destruction will also occur any time the banking sector (including the central bank) buys or sells existing assets from or to consumers, or, more often, from companies or the government.

McLeay, Michael & Radia, Amar & Thomas, Ryland. 2014.“Money Creation in the Modern Economy”. Monetary Analysis Directorate. Bank of England Quarterly Bulletin (Q1, 2014): 14-27.

ix. Besides regular banking there is also something called shadow banking, which in size of generating credit might be bigger than the regular banking sector and more prone to create boom-bust cycles. Enabled by bookkeeping tricks, advanced software and light regulation, McMillan (2014) showed “how an unsustainable boom in the shadow banking sector led to a banking panic: the financial crisis of 2007-08″. McMillan’s solution is to subject any financial institution to strict accounting rules which would prevent them from creating credit out of nothing, a proposal largely overlapping with Sovereign Monetary Reform (SMR).

McMillan, Jonathan. 2015. The End of Banking: Money, Credit, and the Digital Revolution. Zurich, Switzerland: Zero/One Economics.

x. There are multiple ethical problems which inhere in the current monetary design, not only pertaining to environmental justice, but also to issues of economic and social justice like economic inequality and uncertainty, social polarization between a rising rentier class (creditors) and a squeezed middle and working class (debtors), social marginalization and expulsion, exploitation of labor and suppression of wages, oligopolies and price gouging, capital flight and tax evasion, and many other effects observed and correlated with the modern, corporate, globalized, capitalist system.

Di Muzio, Tim & Robbins, Richard. 2016. Debt as Power: Theory for a Global Age. Manchester, UK: Manchester UP.

Idem. 2017. An Anthropology of Money: A Critical Introduction. London: Routledge.

Idem. 2020. “Capitalized Money, Austerity and the Math of Capitalism“. Current Sociology, 68/2: 149–168.

xi. According to Joseph Huber (2017) monetary sovereignty has three components:

Sovereign money gives a nation-state, or community of nation-states, monetary sovereignty. This includes three monetary prerogatives:

• Determining the currency of the realm, the monetary unit of account;
• Creating and issuing money, the means of payment denominated in that currency;
• Benefiting from the seigniorage, the gain that accrues from the creation of money.

Huber, Joseph. 2017. Sovereign Money: Beyond Reserve Banking. London: Palgrave Macmillan. Page 39.

xii. In the case of the USA, sovereign monetary reform (SMR) would entail the three following inter-connected changes to the CMS:

• The Federal Reserve is dismantled and good parts are placed into the US Treasury. A Monetary Authority is created which avoids an inflationary or deflationary money supply;
• Accounting rule changes prohibit the banks from creating what we use for money- from using debt for money – what’s known as fractional reserve banking is decisively ended;
• The Congress originates (creates) new US Money and spends it into circulation, for infrastructure, health care and education.

Summary of H.R.2990 – National Emergency Employment Defense Act of 2011 (NEED Act). 112th US Congress (2011-2012).

xiii. According to Huber (2023) a possible constructive step into the direction of a full sovereign monetary system would be a well-constructed and well-programmed Central Bank Digital Cash (CBDC).

Huber. Joseph. 2023. The Monetary Turning Point: From Bank Money to Central Bank Digital Currency (CBDC). Cham, Switzerland: Palgrave Macmillan. Page .

xiv. The NEED Act was modeled on the 1930s Chicago Plan developed by then prominent economists trying to cope with the causes of the Great Depression. Michael Kumhof & Benes (202) tested this plan and concluded:

Fisher (1936), in his brilliant summary of the Chicago Plan, claimed that it had four major advantages, ranging from greater macroeconomic stability to much lower debt levels throughout the economy. . . . Our analytical and simulation results fully validate Fisher’s (1936) claims. The Chicago Plan could significantly reduce business cycle volatility caused by rapid changes in banks’ attitudes towards credit risk, it would eliminate bank runs, and it would lead to an instantaneous and large reduction in the levels of both government and private debt.

Kumhof, Michael & Benes, Jaromir. 2012. “The Chicago Plan Revisited.” IMF Working Papers 12/202. Washington: International Monetary Fund.

See also: Phillips, Ronnie. 2015 (1994).The Chicago Plan & New Deal Banking Reform. Oxon, UK & New York, NY: Routledge.

xv. Much of this new money could/should be channeled through National Development Banks (NDBs) and Multilateral Development Banks (MDBs) to attain Sustainable Development Goals (SDGs) as argued by Mazzucato (2023).

While the SDGs present a commendable blueprint for achieving inclusive and sustainable growth, they do not yet provide a detailed investment strategy or guide for actualizing that vision. This requires a clear and inspirational direction for finance and investment, with multiple portfolios and trajectories on getting there—exactly what a mission-oriented approach to finance can help provide

Mazzucato, Mariana. 2023. Financing the Sustainable Development Goals through mission-oriented development banks. UN DESA Policy Brief Special issue. New York: UN Department of Economic and Social Affairs; UN High-level Advisory Board on Economic and Social Affairs; University College London Institute for Innovation and Public Purpose. September, 2023.

xvi. According to David Wilkinson (1987) global civilization is maybe better named ‘the global phase of central civilization’.

Today there exists on the Earth only one civilization, a single global civilization. As recently as the nineteenth century several independent civilizations still existed (i.e. those centered on China, Japan, and the West); now there remains but one. Central Civilization. The single global civilization is the lineal descendant of, or rather I should say the current manifestation of, a civilization that emerged about 1500 B.C. in the Near East when Egyptian and Mesopotamian civilizations collided and fused. This new fusional entity has since then expanded over the entire planet and absorbed, on unequal terms, all other previously independent civilizations.

Wilkinson, David. 1987. “Central Civilzation”. Comparative Civilizations Review, 17/17: Article 4.

xvii. Tim Di Muzio (2015) proposes a periodization of historical time in three ages:

. . . if fossil fuels are nonrenewable on a scale useful to humans, then it would appear that carbon capitalism and petro-market civilization are transitory historical structures within what Braudel (1983) called the longue dureé. We can thus conceive of three historical eras: an age before fossil fuels, the age of carbon energy and the post–carbon energy age for the duration of human existence.

Di Muzio, Tim. 2015. Carbon Capitalism: Energy, Social Reproduction and World Order. London, UK & Lanham, MD: Rowman & Littlefield. Page 32.

xviii. Holli Riebeek (2011) makes the following basic observation:

Carbon is the backbone of life on Earth. We are made of carbon, we eat carbon, and our civilizations—our economies, our homes, our means of transport—are built on carbon. We need carbon, but that need is also entwined with one of the most serious problems facing us today: global climate change.

Riebeek, Holli. 2011. “The Carbon Cycle”. NASA, Earth Observatory.

xix. The NEED Act (2011) calls for the US congress to delegate the power of money creation to an independent Monetary Authority (MA), which would be legally walled off from both corporate and political influence to follow its mandate to manage the money supply such that it is neither inflationary nor deflationary.

The Monetary Authority shall pursue a monetary policy based on the governing principle that thesupply of money in circulation should not become inflationary nor deflationary in and of itself, but willbe sufficient to allow goods and services to movefreely in trade in a balanced manner. The MonetaryAuthority shall maintain long run growth of themonetary and credit aggregates commensurate withthe economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.

Section 302, Clause (5) of H.R.2990 – National Emergency Employment Defense Act of 2011 (NEED Act). 112th US Congress (2011-2012).

xx. Alliance For Just Money. Petition to Create a Just Money System.

xxi. Besides many others, the former finance minister of Greece, Yanis Varoufakis, called for a revival of Keynes’ idea of an international clearing union (ICU) with a common accounting unit.

A new ICU, or NICU, would be as Keynes had envisaged it. But, in place of the abstract bancor, it would feature a common digital currency – say, Kosmos – to be issued and regulated by the IMF. The Fund would administer Kosmos on the basis of a transparent digital distributed ledger and an algorithm that would adjust total supply in a pre-agreed manner to the volume of world trade, allowing for an automatic countercyclical component that boosts global supply at times of a general slowdown.

Varoufakis, Yanis (2016). “Imagining a new Keynesian Bretton Woods“. WEF and Project Syndicate, 6 May 2016.

xxii. A far-sighted proposal for a radical overdo of the entire international monetary system, including its sub-systems of finance and trade can be found in Verhagen (2012 & 2020).

Verhagen, Frans. 2012. The Tierra Solution: Resolving Climate Change Through Monetary Transformation. New York: Cosimo Books.

Idem. 2022. Transforming Money. Web site by author.

xxiii. In a set of recommendations developed by Joseph Stiglitz (2010) the proposal was made to institute an intergovernmental panel along the lines of the IPCC.

In the short term, there should be an appropriate mechanism within the United Nations system for independent international analysis of questions of global economic policy, including its social and environmental dimensions. Following the successful example of the Intergovernmental Panel on Climate Change, an expert panel could be created to offer advice to the General Assembly and the Economic and Social Council, as well as to relevant international organizations, to: enhance their capacity for sound decision-making in these areas; identify gaps and deficiencies in the global economic architecture; and assess progress and problems in the functioning of the global economic and social system.

Stiglitz, Joseph. 2010. “Recommendatios by the Commission of Experts of the President of the General Assembly of United Nations on reforms of the international monetary and financial system”. New York: United Nations.

xxiv. A minimal text of a possible Petition to Establish a UN Monetary Commission of Inquiry Into the Global Monetary System:

We the undersigned Petitioners hereby call upon the UN General Assembly to establish a UN Monetary Commission (UMC) to inquire upon the operations and impacts of the current international monetary system operated by a conglomerate of international institutions (IMF, World Bank, WTO, BIS, FSB) and also to explore the benefits of 1) a supranational reserve currency; 2) an international clearing system; 3) a monetary authority of currency issuance; and 4) an Intergovernmental Panel on Economic and Social Issues (IPESI); and all operated with the goal of a monetary system capable of equitably delivering wealth and incomes to and for all earth’s people.

For possible guidance see: “Resolution Number One: On the Establishment of a National Commission of Inquiry Into the Monetary System of the United States of America” and “Petition to Establish a National Commission of Inquiry Into the Monetary System of the United States of America“. Adopted by the Alliance For Just Money, 6 March 2020.

xxv. Multiple reports have been issued, which were commissioned by national governments, addressing public money creation.

Sigurjonsson, Frosti. 2015. “Monetary Reform: A Better Monetary System for Iceland“. A Report Commissioned by the Prime Minister of Iceland. March 2015. Foreword by Aidar Turner. Rekjavik, Iceland.

WRR. 2019. “Money Creation“. The Netherlands Scientific Council for Government Policy (WRR).

WRR. 2019. Money and Debt: The Public Role of Banks – Summary of WRR Report. The Hague: Netherlands Scientific Council for Government Policy.

xxvi. Besides the long-term solution of sovereign monetary reform, there are some who think that the more short-term, partial solution of a modern version of a debt jubilee might be salutary. For example, under the motto ‘debts which can’t be paid, won’t be‘ Hudson and Goodhart (2018) looked at the ancient practice of Debt Jubilees, which they argue were very effective to prevent the rise of a dominant creditor class to whom the rest of society would be indebted at different degrees of bondage.

To insist that all debts must be paid, regardless of whether this may bankrupt debtors and strip away their land and means of livelihood, stands at odds with the many centuries of Near Eastern clean slates. Their success stands at odds with the assumption that creditor interests should always take priority over those of the indebted economy at large.

In sum, the economic aim of debt jubilees was to restore solvency to the population as a whole. Many royal proclamations also freed businesses from various taxes and tariff duties, but the main objective was political and ideological. It was to create a fair and equitable society.

Hudson, Michael and Charles Goodhart. 2018. “Could/should Jubilee debt cancellations be reintroduced today? If not, what alternative measures of debt relief and redistribution might be possible?“. Economics: The Open-Access, Open-Assessment E- Journal, 12 (2018-45): 1–25. Page 5.

During the COVID-19 pandemic Hudson (2020) proposed a more straightforward plan for debt forgiveness.

The way to restore normalcy today is a debt write-down. The debts in deepest arrears and most likely to default are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A write-down would be pragmatic, not merely moral sympathy with the less affluent.

Hudson, Michael. 2020. “A debt jubilee is the only way to avoid a depression“. Washington Post, 21 March 2020.