The future of money, banks, and credit



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  • The future of money, banks, and credit -
  • reconciling democratic values and the financial world
  • Univ.-Lektor Mag. Christian Felber
  • www.christian-felber.at
  • www.ecogood.org
  • www.mitgruenden.at
  • IUHF, 12th september 2014
  • „Money.
  • The new rules of the game“
  • Basis of this input
  • „too big to fail“ (SIFI)
  • Shadow banks
  • Tax havens
  • High frequency trade
  • Food speculation
  • Attacks on currencies
  • Dysfunctional monetary order
  • 1. Absence of international supervisory authority
  • 2. No size limit for banks
  • 3. Free movement of capital (in tax havens)
  • 4. Unlimited inequality
  • 5. Private money issuance
  • Old paradigm: „free“ financial markets
  • This could mean:
  • The rules are made democratically
  • The public central bank issues the money
  • Money is a public infrastructure (for free markets)
  • All banks are orientated towards the common good
  • New paradigm: money = public good
  • Democracy
  • Fundament/Oxigen = polites ≠ „idiotes“
  • Indirect
  • Democracy
  • Main stage
  • Direct
  • Democracy
  • Completion
  • Participatory
  • Democracy
  • Perpetuation
    • Local monetary conventions
      • 10 - 20 fundamental questions
      • deliberation
  • Democratic framework + process
  • Who issues the money?
  • Who defines the goals of the central bank?
  • How is the public debt financed?
  • Which is the goal of private banks?
  • For which purposes are loans granted?
  • Is there a need for a global Financial Authority?
  • Shall food prices be defined by markets?
  • Shall the movement of capital in tax havens be free?
  • Shall inequality be unlimited?
  • Shall a global monetary cooperation be implemented?
  • Questions to the money convention
    • Local monetary conventions
      • 10 - 20 fundamental questions
      • deliberation
      • delegation
  • Democratic framework + process
    • Local monetary conventions
      • 10 - 20 fundamental questions
      • deliberation
      • delegation
    • Federal monetary convention
      • Referendum by SK method
      • Constitutional part on money
      • Clear basis for Parliament
  • Democratic framework + process
  • Money Issuance
  • Banks
  • Credit
  • Stock markets
  • 4 hot issues of the financial system
  • Public Central Banks
  • Public issuance of bank notes and coins
  • Issuance of bank money only by Central Bank = „Plain Money Reform“
  • 1. Money as a public infrastructure
  • 1. „Plain money“ reform
  • Joseph Huber:
    • Monetary Modernisation
    • People's initiative in
    • Switzerland since June 7th
  • Separation of money (issuance) + credit (lending)
  • All circulating money is fully valid Central Bank money
  • Money enters into circulation as „gift“
  • Gains from money creation are a public benefit
  • Control of money supply by Central Bank
  • Secure „money accounts“ → less bank runs
  • High public gains through system change
  • 1. „Plain money“ reform
  • „It might even be the case (if not a catastrophe like a World war happens) that the sovereign debt will be eliminated totally.“
  • Irving Fisher 1935
  • Idea is older ...
  • „These results (…) support three out of Fisher’s (1936) four claims in favor of the Chicago Plan (…) But we can go even further, because our general equilibrium analysis highlights two additional advantages of the Chicago Plan.“
  • IMF: The Chicago Plan Revisited, 2013
  • History advocates for „public money“
  • „The transition to a system in which money creation is separated from financial intermediation would be feasible, albeit complex. But it would bring huge advantages.“
  • Marin Wolf, Financial Times, April 24th 2014
  • A broader debate starts ...
  • Many bank types originally common good-orientated
  • Raiffeisen
  • People's banks
  • Credit unions
  • Savings banks
  • Public banks (z. B. Post Office Bank)
  • 2. Banks shall serve the common good
  • a) Size limit for banks
  • a) Size limit for banks
  • EU limit for banks too big to fail (€ 30 billion)
  • … no public deposit insurance
  • … no refinancing by ECB
  • … no business with public entities
  • no bailout by taxpayers
  • … regulatory tsunami only for them!
  • b) Common Good Charta or free market
  • Common-good-orientation
  • Conservative core tasks
  • No distribution of profits to owners
  • Exit from interest-taking system
  • Ethical creditworthiness assessment
  • www.mitgruenden.at
  • „Bank for the Common Good“
  • „The money and credit system serves the
  • creation of values and the satisfaction of needs
  • of all inhabitants.“
  • Art. 157, Bavarian Constitution
  • 3. Credit
  • Only real loans („satisfaction of needs“)
  • Only loans that do not harm the common good → common good assessment
  • 3. Credit lending in line with Constitution
  • „Property obliges. Its use shall also serve
  • the common good.“
  • German Grundgesetz, Art. 14
  • No unconditionally free use of capital
  • Loan request Ethical CW + Ethical CW -
  • Financial CW + Bank ---
  • Financial CW - Stock market ---
  • 4. Bank or stock market?
  • In every EU region
  • Not tradable (only returnable)
  • No financial ROI
  • Triple Skyline
    • Meaning, utility, ethics
  • 4. Regional common good stock markets
  • „Money is not an end, it is a means for an end.“
  • Friedrich Wilhelm Raiffeisen
  • Fundamental insight
  • „Private and stock market entities are not obliged to
  • serve the common good.“
  • Alexander Dibelius, Goldman Sachs Germany
  • Infringement of the Constitution
  • „The whole economic activity serves the
  • common good.“
  • Art. 151, Bavarian Constitution
  • Goal of the economy
  • National economy (macro level)
  • Gross Domestic Product >
  • Enterprise (meso level)
  • Financial profit >
  • Investment (micro level)
  • ROI/ROE >
  • Measure economic success differently
  • National economy (macro level)
  • Gross Domestic Product > Common Good Product
  • Enterprise (meso level)
  • Financial profit > Common Good Balance Sheet
  • Investment (micro level)
  • ROI/ROE > Common Good Exam
  • Measure economic success differently
  • Clear visibility
  • - 1600 – 0 Common Good points
  • 1 – 250 Common Good points
  • 251 - 500 Common Good points
  • 501 – 750 Common Good points
  • 751 – 1000 Common Good points
  • ECG label
  • Tax cuts
  • Lower tariffs
  • Lower interest rates for the bank loan
  • Priority in public procurement
  • Research cooperation with universities
  • Legal Incentives
  • „Our old economic system will never come back
  • again. It is time to build a new one."
    • Bill Clinton, Financial Times Deutschland,
    • 5th Oktober 2012
  • Time for a change...
  • Thank you for your attention!
  • www.christian-felber.at
  • www.mitgruenden.at
  • www.ecogood.org
  • For the common good!
  • Proposal Nr. 1 >>>
  • Global Reserve Currency instead of US-Dollar
    • On the base of a basket of currencies
    • National currencies remain
    • Stability and flexibility
  • 6. Global monetary cooperation (Keynes)
  • „The creation of an international currency unit, based on the Keynesian proposal, is a bold initiative that requires extraordinary political vision and courage (…) Unfortunately, the proposal was not accepted.“
  • Essay „Reform the international monetary system“ 2009
  • Zhou Xiaochuan, People's Bank of China
    • „Indeed, the idea of an international reserve currency issued by a supranational bank is not new (...) However, this is an idea whose time has come.“
  • Report to the United Nations General Assembly 2009
  • Joseph Stiglitz, „nobel“ laureate
  • Shall the federal government engage for the persistance of the US dollar hegemony?
  • Shall the federal government engage for a
  • global monetary cooperation?
  • Question 12 to the money convention:
  • Thank you for your attention!
  • www.christian-felber.at
  • www.mitgruenden.at
  • www.ecogood.org
  • Proceed to convention!
    • Adam Smith
    • „Wenn jeder Einzelne so viel wie nur möglich danach trachtet, sein Kapital zur Unterstützung der einheimischen Erwerbstätigkeit einzusetzen und dadurch diese so lenkt, dass ihr Ertrag den höchsten Wertzuwachs erwarten lässt, dann bemüht sich auch jeder ganz zwangsläufig, dass das Volkseinkommen im Jahr so groß wie möglich wird.“
  • Der Beitrag jedes Einzelnen zählt …
    • Adam Smith
    • „Wenn jeder Einzelne so viel wie nur möglich danach trachtet, sein umfassendes Kapital zur Unterstützung der einheimischen Erwerbstätigkeit einzusetzen und dadurch diese so lenkt, dass ihr Ertrag den höchsten Gemeinwohlzuwachs erwarten lässt, dann bemüht sich auch jeder ganz zwangsläufig, dass das Gemeiwohlprodukt im Jahr so groß wie möglich werden wird.“
  • Der Beitrag jedes Einzelnen zählt …
    • „Es ist richtig zu stellen, dass eine nachhaltige Entwicklung das Gleiche ist, wie höchstmögliches langfristiges Wirtschaftswachstum.“
    • Erich Streissler, Wiener Zeitung, 10. Juni 2008
  • Ewiges monetäres Wachstum
  • 1973: Free floating exchange rates
  • 1994: EU liberalizes movement of capital
  • 1995: WTO services agreement (GATS)
  • 1999: EU financial common market
  • 2000: Austria: Capital Market Strengthening Law
  • 1990-2002: Germany: Financial Markets Enhancement Laws I - IV
  • Pseudoliberal Re-Regulation
  • Maximale Vergabe von Krediten
  • Handel mit Krediten
  • Verpackung zu Mischpaketen (CDO)
  • Versicherung dieser Mischpakete (CDS)
  • Maximale Vermehrung der Sparvermögen
  • Global wettbewerbsfähig = systemrelevant werden
  • Gewinnmaximierung und -ausschüttung
  • Lobbyismus = Ende der Demokratie
  • Wozu sind Banken nicht da?
  • Deutsche Bank: 51,4%
  • Commerzbank: 23,4%
  • Postbank: 22,3%
  • HypoVereinsbank: 19,9%
  • Affiliates in tax havens
  • Economic hypertrophy
  • „too big to fail“
  • Political hypertrophy
  • „to big to jail“
  • Hypertrophy
    • „Was nützt es Deutschland als viertgrößter Volkswirtschaft der Welt, wenn wir die Deutsche Bank vierteilen? (…) Ich komme eher zu dem Ergebnis, dass Deutschland einen zweiten großen Spieler wie die Deutsche Bank braucht.“
    • Peer Steinbrück, Der Standard, 9. Oktober 2010
  • Noch ein bisschen größer …
  • US banks: Balance sheet : GDP
    • 1930 – 1980: +/- 0%
    • 1980 – 2008: + 200%
  • Banken too big
  • „Formation of capital is not an end in itself,
  • But a means of the flourishing of the national
  • economy.“
  • Art. 157, Bayrische Verfassung
  • Constitutional goal
  • Pension funds 28 Billionen $
  • Privatly managed 27 Billionen $
  • Investment funds 26 Billionen $
  • Insurances 20 Billionen $
  • Sovereign funds 4 Billionen $
  • Hedge funds 2 Billionen $
  • Private equity funds 2 Billionen $
  • Total 110 Billionen $
  • Quellen: IFSL Fund Management,
  • Boston Consulting Group 2008
  • Assets under management globally
  • Ausstieg aus dem Anlagedruck
  • Distribution of wealth in Austria
  • 35%
  • 31%
  • 34%
  • The masses: 90%
  • The richest 1%
  • The next 9%
  • 31%
  • 35%
  • 34%
  • „I'm doing God's work.“
  • Lloyd Blankfein, CEO Goldman Sachs,
  • Sunday Times, 8th november 2009
  • Selfunderstanding of an investment banker
  • Shall food prices be defined by markets?
  • Shall food prices be defined by a multi-stakeholder body composed by producers, consumers, and advocats of the environment and future generations?
  • Question 9 to the monetary convention
  • NIW NIL
  • Property 10.000 10.000.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • consumption 10.000 100.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • consumption 10.000 100.000
  • 10% interest in prices - 1.000 - 10.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • consumption 10.000 100.000
  • 10% interest in prices - 1.000 - 10.000
  • savings interest 2% + 200 + 200.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • consumption 10.000 100.000
  • 10% interest in prices - 1.000 - 10.000
  • savings interest 2% + 200 + 200.000
  • capital income tax 25% - 50 - 50.000
  • „Interest calculator“
  • NIW NIL
  • Property 10.000 10.000.000
  • Yearly income 12.000 500.000
  • consumption 10.000 100.000
  • 10% interest in prices - 1.000 - 10.000
  • savings interest 2% + 200 + 200.000
  • capital income tax 25% - 50 - 50.000
  • Net interst income - 850 + 140.000
  • „Interest calculator“
  • Financial wealth : GDP (world)
  • 359%
  • 119%
  • 1980
  • 2007
  • Limitation of income inequality (20 times)
  • Limitation of private property (10 million €)
  • democratization of companies (> 250 employees)
  • Maximum/minimum heritage („democratic gift“)
  • Negative feedback mechanisms
  • Austria 800 times
  • Germany 5000 times
  • US industry 65.000 times
  • US financial industry 360.000 times
  • Top manager : minimum wage
    • Private Property is for noone an unconditional or unlimited right.
    • The ritght to property must not be used at the cost of the common good.“
    • „Populorum Progressio“
    • Social Enzyklika, Sn 23-24
  • Pope Paul VI. 1967
  • „All financial crisis in recent history have
  • been caused by the fact that an
  • Econmomic elite became too powerful.“
  • Simon Johnson, ex senior economist, IMF
  • Capitalism endangers democracy
  • Expenses of Wall Street for Lobbying
  • 1998 – 2008
  • 5,1 billion US dollars
  • Consumer Education Foundation /
  • Essential Information, March 2009.
  • Successful Lobbying
  • „I am convinced that thanks to the new consciousness of the huge advantages that the financial common market offers, highest political priority will be rendered to this action plan.“
  • EU commissioner on the Common Market, May 11th 1999
  • Mario Monti, EU commissioner
  • Elect a government
  • Drop a government
  • Stop a law initiative
  • Initiate and adopt a law
  • Change the Constitution
  • Take control over a public good
  • Give a frame mandate for an international agreement
  • Initiate a constitutional convention
  • „Sovereign Bill of Rights“


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