1. 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, 12 th september 2014

2. „Money. The new rules of the game“ Basis of this input

3.  „too big to fail“ (SIFI)  Shadow banks  Tax havens  High frequency trade  Food speculation  Attacks on currencies Dysfunctional monetary order

4. 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

5. This could mean: 1.The rules are made democratically 2.The public central bank issues the money 3.Money is a public infrastructure (for free markets) 4.All banks are orientated towards the common good New paradigm: money = public good

6. „Sovereign“ democracy Democracy Fundament/Oxigen = polites ≠ „idiotes“ Indirect Democracy Main stage Direct Democracy Completion Participatory Democracy Perpetuation

7. Local monetary conventions 10 - 20 fundamental questions deliberation Democratic framework + process

8. 1.Who issues the money? 2.Who defines the goals of the central bank? 3.How is the public debt financed? 4.Which is the goal of private banks? 5.For which purposes are loans granted? 6.Is there a need for a global Financial Authority? 7.Shall food prices be defined by markets? 8.Shall the movement of capital in tax havens be free? 9.Shall inequality be unlimited? 10. Shall a global monetary cooperation be implemented? Questions to the money convention

9. Local monetary conventions 10 - 20 fundamental questions deliberation delegation Democratic framework + process

10. 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

11. 1.Money Issuance 2.Banks 3.Credit 4.Stock markets 4 hot issues of the financial system

12. 1.Public Central Banks 2.Public issuance of bank notes and coins 3.Issuance of bank money only by Central Bank = „Plain Money Reform“ 1. Money as a public infrastructure

13. 1. „Plain money“ reform Joseph Huber: Monetary Modernisation People's initiative in Switzerland since June 7 th

14. Separation of money (issuance) + credit (lending) 1.All circulating money is fully valid Central Bank money 2.Money enters into circulation as „gift“ 3.Gains from money creation are a public benefit 4.Control of money supply by Central Bank 5.Secure „money accounts“ → less bank runs 6.High public gains through system change 1. „Plain money“ reform

15. „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...

16. „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“

17. „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 24 th 2014 A broader debate starts...

18. 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

19. a) Size limit for banks

20. EU limit for banks too big to fail (€ 30 billion)

21.  … 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

22. 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“

23. „The money and credit system serves the creation of values and the satisfaction of needs of all inhabitants.“ Art. 157, Bavarian Constitution 3. Credit

24. 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

25. „Property obliges. Its use shall also serve the common good.“ German Grundgesetz, Art. 14 No unconditionally free use of capital

26. Loan request Ethical CW + Ethical CW - Financial CW + Bank --- Financial CW - Stock market --- 4. Bank or stock market?

27. In every EU region Not tradable (only returnable) No financial ROI Triple Skyline – Meaning, utility, ethics 4. Regional common good stock markets

28. „Money is not an end, it is a means for an end.“ Friedrich Wilhelm Raiffeisen Fundamental insight

29. „Private and stock market entities are not obliged to serve the common good.“ Alexander Dibelius, Goldman Sachs Germany Infringement of the Constitution

30. „The whole economic activity serves the common good.“ Art. 151, Bavarian Constitution Goal of the economy

31. National economy (macro level) Gross Domestic Product > Enterprise (meso level) Financial profit > Investment (micro level) ROI/ROE > Measure economic success differently

32. 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

34. 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

35. ECG label

36. Tax cuts Lower tariffs Lower interest rates for the bank loan Priority in public procurement Research cooperation with universities Legal Incentives

38. „Our old economic system will never come back again. It is time to build a new one." Bill Clinton, Financial Times Deutschland, 5 th Oktober 2012 Time for a change...

39. Thank you for your attention! www.christian-felber.at www.mitgruenden.at www.ecogood.org For the common good!

40. 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)

41. „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

42. „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

43. 1.Shall the federal government engage for the persistance of the US dollar hegemony? 2.Shall the federal government engage for a global monetary cooperation? Question 12 to the money convention:

44. Thank you for your attention! www.christian-felber.at www.mitgruenden.at www.ecogood.org Proceed to convention!

45. 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 …

46. 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 …

47. „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

48. 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

49. 1.Maximale Vergabe von Krediten 2.Handel mit Krediten 3.Verpackung zu Mischpaketen (CDO) 4.Versicherung dieser Mischpakete (CDS) 5.Maximale Vermehrung der Sparvermögen 6.Global wettbewerbsfähig = systemrelevant werden 7.Gewinnmaximierung und -ausschüttung 8.Lobbyismus = Ende der Demokratie Wozu sind Banken nicht da?

50. Deutsche Bank: 51,4% Commerzbank: 23,4% Postbank: 22,3% HypoVereinsbank: 19,9% Affiliates in tax havens

51. Economic hypertrophy → „too big to fail“ Political hypertrophy → „to big to jail“ Hypertrophy

52. „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 …

53. US banks: Balance sheet : GDP 1930 – 1980: +/- 0% 1980 – 2008: + 200% Banken too big

54. „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

55. Pension funds 28 Billionen $ Privatly managed27 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

56. Ausstieg aus dem Anlagedruck

57. Distribution of wealth in Austria 35% 31% 34% The masses: 90% The richest 1% The next 9% 31% 35% 34%

59. „I'm doing God's work.“ Lloyd Blankfein, CEO Goldman Sachs, Sunday Times, 8 th november 2009 Selfunderstanding of an investment banker

60. 1.Shall food prices be defined by markets? 2.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

61. NIWNIL Property10.000 10.000.000 „Interest calculator“

62. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 „Interest calculator“

63. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 consumption10.000 100.000 „Interest calculator“

64. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 consumption10.000 100.000 10% interest in prices- 1.000 - 10.000 „Interest calculator“

65. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 consumption10.000 100.000 10% interest in prices- 1.000 - 10.000 savings interest 2% + 200 + 200.000 „Interest calculator“

66. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 consumption10.000 100.000 10% interest in prices- 1.000 - 10.000 savings interest 2% + 200 + 200.000 capital income tax 25% - 50 - 50.000 „Interest calculator“

67. NIWNIL Property10.000 10.000.000 Yearly income12.000 500.000 consumption10.000 100.000 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“

68. Financial wealth : GDP (world) 359% 119% 1980 2007

69.  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

70. Austria 800 times Germany 5000 times US industry 65.000 times US financial industry 360.000 times Top manager : minimum wage

71. „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

72. „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

73. Expenses of Wall Street for Lobbying 1998 – 2008 5,1 billion US dollars Consumer Education Foundation / Essential Information, March 2009. Successful Lobbying

74. „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 11 th 1999 Mario Monti, EU commissioner

75. 1.Elect a government 2.Drop a government 3.Stop a law initiative 4.Initiate and adopt a law 5.Change the Constitution 6.Take control over a public good 7.Give a frame mandate for an international agreement 8.Initiate a constitutional convention „Sovereign Bill of Rights“