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Make a guess of the proportion of your waking life you are spending to make, expend, and take care of money. Add to that the years you invested in getting ready to earn it. Finally, count the time you spend worrying about not having enough of it, or in fear of losing what you have...
Nor are you an exception. For the first time in recorded history, the entire world seems to be doing the same thing, now that the ex-Communist countries - and even today's "communist" China - have irrevocably switched to money as the social motivator of choice.
Now ask yourself some simple questions:
While money almost universally fascinates, it has in common with sex and death that it mostly seems to operate at an unconscious level. Even professionals in the field, money managers, bankers--even Central Bankers--rarely fully understand all the implications of the kind of money we use. When the Acting Treasurer of the US, M.E. Slindee was asked to define the "lawful money" which was referred to on the US$10 bill, he merely stated that "The term 'lawful money' has not been defined in federal legislation..." (1)
John Maynard Keynes must have fully understood money. After all, he was the key architect of the monetary system known as the Bretton Woods agreement, instituted at the conclusion of World War Two and under which we still live today. His opinion was: "I know of only three people who really understand money. A professor at another university. One of my students. And a rather junior clerk at the Bank of England." A prudent man, he didn't name any of them.
What Keynes tells us is that you can go right to the top and not find the answer.
The last beings to know about water are the fish. When so many aspects of our world are immersed in money, it takes quite an effort, or lucky coincidence, to become aware of what it is all about...
This was not part of any conscious plan on my behalf; it just happened as I moved from one career step to the next. I now realize that my successive professional activities have given me five very different perspectives on money, and that each has changed what I thought about it before. It is this combination of experiences which has made an unusual observer of the money system.
So, here are the five different perspectives in chronological sequence--not in the order of relative importance.
My very first book, the thesis of my postgraduate work at MIT, was about applying non-linear programming to global currency management for multinational corporations. Written in 1968-69, it got published in 1970 because it was one of the very first applications of systems theory to international finance. It described how to optimize currency management for corporations working in a large number of countries and currencies. It included the description of how to deal with "floating exchanges" (2), at that time a rare occurrence limited to some exotic currencies in Latin America.
When President Nixon decided unilaterally to change the global monetary system in August 1971, by unhinging the US dollar value from its gold standard, he inaugurated a new era of universal floating exchanges, which is still prevailing to this day. The techniques I had developed for some marginal currencies suddenly became overnight the only systematic research relating to how to deal with all the major currencies in the world. At that time, I was a fledgling management consultant. A major US bank negociated exclusive rights to my approach. Our agreement required me to train a group of people at the bank first , and precluded me from remaining active in this particular field for a period of five years. So I was obliged to start a career in another field.
I proceeded, specializing in whole systems analysis, but applied to areas other than floating exchanges. One of my major new clients turned out to be the largest mining company in Peru, and after the nationalization of the entire mining sector, the Peruvian government itself.. The assignment was to developed computer models that would maximize hard currency earnings from allocating mining productions and concentrates on a global level. This turned out a very successful project at the technical level (3). At its fullest development over two-thirds of all foreign exchange earnings of the country were optimized by my models. However, when I found out that all the proceeds of my project were used just to buy some squadrons of the French Mirage Dassault planes for the Peruvian military, I felt that my work had become meaningless. If I wanted to work for the benefit of a Dassault, there had to be better places to do it than the Central Sierra in Peru. Furthermore, my research in the mines had made me aware of the human effort and pain this kind of work exacts in the higher regions of the Andes , and that military toys just didn't make sense in the light of the real problems facing the country.
Therefore, toward the end of 1975, I decided to change professional direction, to take a "reverse sabbatical", i.e. become a Professor of International Finance at the University of Louvain, the oldest university in my native Belgium. I taught in order to gain a broader perspective on Latin American development, and specifically to discover the systemic reason of what I had observed in Latin America: the sudden and troubling accumulation of foreign debt by all countries in the region. Out of this sabbatical appeared several books including the first book (written in 1975-78 and published in 1979), to announce the Latin American debt crisis. This debt crisis exploded on schedule in the early 1980's (4).
As I was finishing this research, out of the blue came a job offer to head the organization and computer department at the Central Bank in Belgium (the institution in charge of managing the national currency, akin to the Federal Reserve for the U.S.). As I had just found out that the Latin American debt crisis was due to an underlying structural flaw of the monetary system itself, I thought that this position could be ideal to verify whether it might be possible to improve the system from within. My very first project--the design and implementation of the brand new European Currency Unit (then called Ecu, now the Euro) --looked like a promising first step in such a direction. Another relevant learning environment was my role as President of the electronic payment system of the country, considered the most inclusive and cost effective payment system in the world.5 However, it took me several years, and a most revealing conversation with the then President of the BIS (the Bank of International Settlements in Basle, or the Central bank of the Central banks, which coordinates the monetary activities of the eleven key monetary countries of the world), to understand that "Central Banks exist to keep the system going as is, not to improve on it" and that therefore any initiatives of reform would have to come from the private sector.
This insight sealed my decision to leave the Central Bank after five years. Having been game warden, I became poacher, as one of the co-founders for one of the first large-scale off-shore currency trading funds. During the three and a half years I was its General Manager and Currency Trader (i.e. from its inception in 1987 to May 1991), the largest of these funds (Gaia Hedge II) was the top performing managed currency fund as well as number one among all off-shore funds. We almost tripled the money in three years, which put us at the top of the Micropal survey of 1800 offshore funds. The speculation systems used provided a continuously feel for the pulse of the twenty-two major currencies in the world, and enabled us to take simultaneous positions among them all. While I learned a lot when the speculative systems were working well, I learned even more when they were not.
In summary then, I happen to have been intimately involved in looking at the global monetary system from five different perspectives: successively from a multinational corporation to a developing country viewpoint, from an academic to a hands-on central banking and currency speculation viewpoint. Several of these experiences are typically mutually exclusive. Therefore, while many people have had one or several of these experiences, the combination of all five is a lot less usual. Every one of these experiences forced me to thoroughly reconsider what I thought I knew about money.
This book is my attempt to simply synthesize what I have learned so far about this mysterious thing called money.
It feels a bit like a flying fish who tries to report back to its fellow fish what it learned about water "from out there"; what it may really be all about.
In short, it is about bringing conscious awareness to the money system, and use that awareness to shape our present and future. We'll also see how different societal objectives can be supported - or impeded - by specific kinds of currencies.
I have come to the conclusion that one of the most promising approaches to shape our future--probably the most powerful tool we have available on a collective level--is to bring conscious choice into the arena of our money system. The reason is that money could be described as the universal social incentive, the reward towards which most individual and corporate efforts converge.
Textbooks claim that corporations and individuals compete for resources and markets; in reality they simply compete for money, using resources and markets in this process. Therefore, by redesigning the money target, we could re-orient the vast energy of market competition in another--hopefully better--way, while requiring less regulation and taxation to achieve our socially desirable aims.
The main obstacle to our aim of harnessing such conscious choice is the widespread belief that in the modern world an alternative money system is not even thinkable. We will discover that--below the radar beams of many official monetary experts--fundamental change in our money systems is in fact already well under way, irresistably driven by the social and technological forces of the Information Age. The real issue is not whether widespread changes will happen or not, but how much awareness there will be about where these changes are leading us. The real question is whether we are even conscious that we have a choice in the matter.
This issue of conscious choice about money systems is further made difficult because of money's tradition of secrecy and mystery. This mystery has an extraordinarily long history: for thousands of years it was of a religious nature, now money remains enchanted just as effectively by a spell of academic jargon and esoteric equations.
Our challenge will therefore be to bring the ideas down from the academic ivory towers while remaining conceptually sound. We aim to achieve this by streamlining the main text, and relegating to footnotes and technical Appendices the complexities which are not essential to follow the core arguments. This is therefore not a general treatise on money, because we do not claim to cover all aspects of the topic, only bring to sunlight those few that are essential to understand the choices at our disposal.
| I. Money: a Conscious Choice
|
This book is organized in two main parts.
The first part, Money: a Conscious Choice, starts by demystifying what money really is (chapter 1). In its four chapters we will play a game: tell me what your objectives are, and we can design a currency that will support them.
For example, if you want to build up the power of the nation-state and concentrate resources for heavy industry development, we will show why today's money system performs that task rather well (chapter 2). However, if you want to rebuild the communities that are breaking down all over the world and reduce joblessness without inflation, we can examine several very successful models: well over a thousand communities (particularly in Australia, New Zealand, Canada, Brazil, Britain and several Continental European countries) have already started using their own local non-competitive community currency with significant results (chapters 3 to 5).
If you want to reconcile the apparent conflict between ecological sustainability and economic growth, a new kind of global currency can muster the massive resources of the multinational corporations to get us there. (chapter 5).
Money is rapidly becoming a cheaper and more effective tool: existing national currencies grow more and more streamlined with the help of computers, and new electronic currencies are taking flight on the Internet. These technological choices can and will transform the fabric of society--to a greater extent than even those introducing the changes may realize (chapter 6).
In conclusion, we will see how several of these different money strategies are not mutually exclusive, but can be employed in tandem so they complement each other (chapter 7).
In part II, Why Now?, we will explore the social psychology of money: why and how our collective unconscious has generated the kind of money we use predominantly today. Where is the desire for this kind of money coming from? Are greed and scarcity, as is explicitly assumed in all our economic theory and almost universally accepted, an indelible part of human nature and behavior? Or are those core emotions of greed and fear of scarcity both constantly being created and reinforced by the current money system itself?
These questions are directly relevant here because they illuminate under what circumstances change in the money system can be expected. Right now, we are swiftly propelled by an array of historically unusual technological, social, economic and psychological factors toward major changes in the money system. These engines of change are the topics covered in the following four chapters.
First we will familiarize ourselves with the concepts necessary to explore the collective psychology of money. All professional operators, brokers, fund managers, financial experts will confirm that markets are mostly driven by collective emotions. Carl Gustav Jung's work provides us with a theoretical foundation on which we may examine such collective emotions: the concept of Archetypes. Archetypes may be defined as individual or collective emotional frameworks--models of tendencies toward certain interpretations, thoughts and actions. If, for example, a person or a group is under the influence of the Warrior archetype, the interpretations of a threat, the emotion of anger, and the action of punching the opponent's nose, are more likely than if they are under the influence of the Lover archetype. One most important finding of Jung's work is that whenever a particular Archetype is repressed, its Shadow automatically appears. For instance, if a person or a group has repressed the King/Queen Archetype--the representation of the majestic Higher Self--they will automatically behave as a Tyrant or a Weakling, the antithesis or shadow of the noble King/Queen. (chapter 8).
One particular archetype, the Great Mother/Provider, happens to have been systematically repressed over the past five thousand years, especially in Western societies. Therefore, if Jung is correct, we should also find its shadows prevailing in society. What are the shadows of the Provider Archetype? They turn out to be none other that the Greed and Fear of Scarcity syndromes we see haunting our money system. Empirical historical evidence further points out that whenever the Provider archetype was honored in a society, specific money systems came into being which in turn created generalized economic well-being (Chapter 9).
Fitting all the pieces of the puzzle together--the technological changes, economic and ecological pressures, as well as the less tangible collective socio-psychological foundations--it appears that the time may indeed have come when we will have the opportunity, even the obligation, to consciously re-invent our approach to money. (Chapter 10).
| There will also be stories, which may take many forms, from totally real to quite imaginary: newspaper clippings, letters to a friend, fairy tales for my seven-year-old godchild, or notes from my time travel days. These will all be identified by boxes as this one. Although they relate to and illustrate the topic where they appear, they can also stand alone as stories should. |
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