Latest abstract for an article on TIMU

December 22, 2008

This article presents a proposal for transforming the international monetary system into the Terra International Monetary Union (TIMU). The TIMU system would be an essential part of a comprehensive approach to dealing with the global economic recession and the climate crisis, given that an international monetary system is the glue of the economic and financial system. While reform proposals, such as Keynes’ “bancor”, Stiglitz’s “global greenback” and others address themselves to providing the monetary glue of a new global non-national monetary standard between nations, the TIMU proposal adds to this huge challenge the inclusion of the ecological dimension, i.e. of carbon debts and credits, into their balance of payments (BOP) by adding an extra line for a carbon account. Using clauses of the proposed FEASTA's Treaty of Noordwijk Aan Zee, TIMU’s integrated accounting unit, the Terra, would include both the economic and carbon debts and credits between nations. By integrating both accounts TIMU’s Central Bank would become the global facility that administers the balance of payments between financial creditor nations in the global North who are ecological debtors to the nations in the global South, and the financial debtor nations in the global South who are ecological creditors to the nations in the global North. As a result sustainability, stability and equity can be achieved in the monetary field, possibly within a decade. The article describes the historical context of international efforts for a world currency--Mill’s political economy treatise of 1844, the 1867 Paris Conference, 1930 Bank of International Settlements, 1944 Keynes Plan, IMF’s 1969 Special Drawing Rights. Then it presents the six major components of the Terra International Monetary Union, particularly its Global Central Bank’s accounting, monitoring and credit creating activities and the necessary monetary institutions of the nations that become signatories of the TIMU Treaty. This is followed by a categorized list of reasons for the TIMU approach in dealing with economic and climate crises, showing both its strengths and weaknesses. Constraints and challenges for an eventual TIMU Treaty are discussed within the context of the ever deepening economic and climate crises. Main authors consulted are: Bonpasse 2007; Cohen 2004; Douthwaite 1992; Duncan 2005; Eichengreen 2008, Greider 1987 and 2003; Minsky 2008; Mishkin 2007; Mundell, various years; Skidelsky 2003; Stiglitz 2003. A discussing paper of 10 pages is available up
on request.

Summary of the TIMU proposal

While solutions to the deepening global recession and the climate crisis have a score of dimensions that are to be integrated in order to be resolved, one major dimension that is not given sufficient attention on the global level is the one of the monetary system. This system of floating currencies, fiat money, accounting units, exchange rates, reserve currencies, balance-of-payments mechanisms, --a major support to any global economic system—is in dire need not only of reform, but of transformation. Such transformed system should not only provide stability in balancing monetary matters of economic debts and credits between nations, but should also include a carbon account that reflects the ecological, particularly carbon credits and debits of member states. The resulting system would be an integrated international monetary union where the present inconvertible US Dollar is replaced by a new accounting unit which can be called the Terra-Latin for Earth-to symbolize the integrated accounting of social and ecological realities between nations. This proposed transformed international monetary system can be called the Terra International Monetary Union or TIMU because the final phase will lead to an integrated global payment union that settles the accounts of both economic and ecological, i.e. carbon credits and debts. This TIMU proposal reflects the reality of 21st century’s economic and climatological challenges by conceptualizing the economic creditor nations in the global North which are ecological debtor nations and economic debtor nations in the global South which are ecological creditor nations.

The article presents the history of monetary relations between nations, particularly as expressed in the Bretton Woods institutions of the IMF and IBRD, the August 1971 US abrogation of the gold standard and the present limitations and even fatal flaws of the international monetary system, that also underlie the food, fuel, climate crises. Guides in this section are Eichengreen, Keynes, Duncan and others. After setting the historical context for the TIMU proposal will be compared with various reform proposals one of which is the “global greenback” proposal by Joseph Stiglitz. Taking the 4 phases of the 1980s Delors Commission that lead to the establishment of the European Monetary Union as an example 5 phases will be presented for TIMU to become a conceptual reality. The scheduled April 20, 2009 international economic summit would decide to set up the UN Commission on the Integrated International Monetary System which would lead to a Cooperation Fund, which would lead to an Monetary Institute, to a partial monetary union of current economic accounting with the establishment of a global central bank and, finally, a complete monetary union that integrates accounting of both economic and ecological, i.e. carbon credits and debts between nations.
The constraints and challenges of a TIMU like transforming of the present international monetary system are daunting on multiple dimensions of the economic, political and cultural relations between nations. The article will sketch the many positive and negative factors that would help or hinder a serious discussion and adoption of this integrated international monetary system. Some of them are: the disaster of the global economic recession, the growing global awareness of the pending catastrophic effects of the climate crisis which would aggravate the present crises in food, fuel, water, shelter, health, etc... Also included in this discussion is the positive trend of the integration of social and ecological values in a common value system where the term of reference has become the community of life rather than the human community as expressed in the biocentric vision of the Earth Charter. The discussion of these constraints and challenges would lead to the conclusion that a transformed international monetary system such as presented in the TIMU proposal can become a valuable tool in the global tool box in not only dealing with the global economic recession and the climate crisis, but also in expediting humanity’ transition into a sustainability revolution where the social, political and ecological relations between nations will lead to greater purchasing power and quality of life not only in the global North, but especially in the global South. The present unsustainable global economic system that enriches the few, impoverishes the many and endangers the planet will be replaced with a panoply of steady-state economies where not only economic and ecological credits and debits are accounted in an integrated international monetary system, but also where justice, both social and procedural, is the guiding principle as opposed to the present growthism principle

Abstract for an article on the TIMU proposal

This article presents a proposal for transforming the international monetary system, i.e. the . Terra International Monetary Union or TIMU system. TIMU would be an essential part of a comprehensive approach to dealing with the global economic recession and the climate crisis, while also expediting humanity’s transition into sustainable societies, the social, political and ecological relations of which will lead to greater purchasing power and quality of life not only in the global North, but especially in the global South. While reform proposals, such as Joseph Stiglitz’s “global greenback” intend to remove the US dollar as the international monetary standard between nations, the TIMU proposal adds to this the challenge of including the ecological dimension, i.e. carbon debts and credits, into their balance of payments (BOP) by adding a carbon account . The article outlines the three fatal flaws in the present international monetary system, which came into being after the collapse of the Bretton Woods system (August 1971). With the collapse of Bretton Woods architecture, it was no longer possible to convert US currency with gold and the mechanism which automatically adjusted surplus and deficits in the trade balances and capital flows between countries disappeared, leading to excessive credit creation with its boom and busts. While supporting the need for a Bretton Woods II, the article considers how carbon accounting and allocation can be used to create carbon accounts that can be part of the proposed transformed international monetary system. This system would replace the present US$ standard with the integrated Terra (Latin for Earth) standard which would lead to the return of fixed exchange rates as part of the proposed Global Central Bank’s accounting, monitoring and credit creating activities.