Bernard Lietaer's Four-Layered Proposal for Cosmo-Local Monetary Biodiversity

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Synthesis by Ansel Reed:

(translated from the Dutch)

"Bernard Lietaer was one of the architects of the European monetary system, and later became one of its sharpest critics. The West Fleming from Lauwe trained as a civil engineer, became a senior official at the National Bank of Belgium, and as a monetary expert was closely involved in launching the ecu, the precursor to the euro. He lectured in international finance at KU Leuven and conducted research at Berkeley. In 1992, Business Week named him the world's best currency trader.

Lietaer's critique of the monetary system was that of an insider who had seen it work from within and consciously chose to distance himself from it.

His argument was not that money is bad, but that monoculture in money is just as fragile as monoculture in agriculture.

A single crop yields high returns in good times. But it has no resilience. One disease, one drought, and everything is lost.

Our monetary system is such a monoculture. One type of money for all functions: exchange, storage, unit of account, global trade. When that system fails, everything fails at once.

The solution to monoculture is diversity. Multiple types of money alongside each other, each with different properties, together robust where each individually is fragile.

The Four Currencies

Lietaer's proposal was concrete: four types of money, parallel, each for a different domain.

1. Regional complementary currencies

For the local economy and daily use. With demurrage: a small negative interest rate that discourages hoarding and promotes circulation. Money that loses its value when it sits still behaves differently from money that yields interest when stored. It flows. It supports local care, neighborhood work, mutual services.

This is the domain of the flow-based systems from previous blog posts: complementary currencies, time banks, mutual credit. Not as a replacement for national money, but as a supplement for the layer that national money has never served well.

2. National currencies

For daily use on a national scale, taxes, wages, national trade. Not fundamentally different from today, but supported by the other layers rather than functioning alone.

3. International clearing

For balance of payments between central banks. Keynes already proposed a system in 1944 with an international currency, the bancor, which automatically corrects trade imbalances. Not only deficits are a problem, but also surpluses: both must be limited. Countries with deficits are forced to limit their imports or increase exports, but countries with persistent surpluses are equally under pressure to import more or invest more. Both sides must adjust.

This proposal was rejected at the Bretton Woods Conference in favor of the dollar. But the idea remained.

4. TERRA: the global layer

This is Lietaer's most original contribution, elaborated in 2001. TERRA is a global trade currency, backed by a basket of the most traded commodities and services: energy, grains, metals, but also carbon credits as a proxy for ecological throughput.

The special feature: the basket is based on thermodynamics, not on market prices. Its composition is inspired by the real material throughput of the global economy. Not what speculators find valuable, but what the planet actually passes through.

By including carbon credits in the basket, ecological damage automatically becomes more expensive. Not via taxes, not via case-by-case deliberation, but structurally, through the unit of account itself.

TERRA also has demurrage on a global scale: storing commodities costs something. This discourages speculative storage and rewards circulation. TERRA works like a barley currency on a planetary scale.

It is no coincidence that C², which we discussed in previous blog posts, clearly stands in the same tradition: a narrower, operationally workable basket with carbon credits as an ecological proxy. C² is essentially a contemporary, more pragmatic variant of the same basic idea.

Why multiple currencies are more robust

Nassim Taleb would call this antifragile. A system consisting of multiple components with different properties never completely fails. If the regional currency collapses, the national one remains. If the national currency falls into crisis, TERRA absorbs the shock in global trade.

But there is a deeper argument. Different domains of human activity have fundamentally different logics. Care and reciprocity function differently from global commodity trading. The local community economy has different needs than currency hedging between central banks.

One currency for everything forces one logic onto all domains. That is not efficiency. That is the colonization of one sphere by the logic of another.

Multiple currencies alongside each other allow each sphere to breathe in its own rhythm."

(https://anselreed.substack.com/p/blog-11-niet-een-munt-maar-vier)