View source for Options for Managing a Systemic Bank Crisis


'''Article: Options for Managing a Systemic Bank Crisis. Bernard Lietaer, Dr. Robert Ulanowicz, and Dr. Sally Goerner. Sapiens-journal Volume 2, number 1, March 2009'''

URL = http://sapiens.revues.org/index747.html [http://www.lietaer.com/images/Sapiens_text_final.pdf]


=Executive Summary=

"The on-going financial crisis results not from a cyclical or managerial failure, but from a
structural one: more than 96 other major banking crises occurred over the past 20 years, and these
crashes have happened under very different regulatory systems and at different stages of
economic development. So far, conventional solutions are being applied—nationalization of the
problem assets (as in the original Paulson bailout) or nationalization of the banks (as in Europe).

These solutions only deal with the symptoms and not the systemic cause of today’s banking
crisis. Similarly, the financial re-regulation that will be on everybody’s political agenda will, at
best, reduce the frequency of such crises, but not avoid their re-occurrence. Better solutions are
urgently needed because the last breakdown of this magnitude, the Great Depression of the 1930s,
ended up in a wave of fascism and World War II.

In this paper, we describe a recent conceptual breakthrough—based on the functioning of
balanced ecosystems— that shows that all complex systems, including our monetary and
financial ones, become structurally unstable whenever efficiency is overemphasized at the
expense of diversity, interconnectivity and the crucial resilience they provide. The point is not
that ecosystems are a useful metaphor for economies. Rather, both economies and ecosystems
follow deeper laws that apply to all complex flow systems, including economies and ecosystems.
The surprising insight from such a systemic perspective is that sustainable vitality in the financial
realm involves diversifying the types of currencies and institutions, by introducing new ones that
are designed specifically to increase the availability of money in its prime function as a medium
of exchange, rather than for savings or speculation. Additionally, these currencies are expressly
designed to link unused resources with unmet needs within a community, region or country.

These currencies are know as complementary because they do not replace the conventional
national money, but rather, operate in parallel with it.

We submit that such a systemic understanding is available, and that a technical solution can now
readily be implemented that would ensure that the devastating effects of banking and/or monetary
crashes become a phenomenon of the past. The most effective way for governments to support
such a strategy of a more diverse and sustainable monetary ecology would be to accept a well-designed,
robust complementary currency in partial payment of taxes during a period when banks
are not in a position to fully finance the real economy. The choice of such a complementary
currency is both a technical issue (robustness and resilience against fraud) and a political one
(what type of activities are desirable to support). A good candidate for consideration would be a
professionally run business-to-business (B2B) complementary currency based on the model of the
WIR system. This currency has been successfully operational for 75 years in Switzerland, now
involving a quarter of all the businesses in that country. Peer-reviewed econometric analysis has
proven that the WIR acts as a significant counter-cyclical stabilizing factor that explains the
proverbial long-standing stability of the Swiss economy."
(http://www.lietaer.com/images/Sapiens_text_final.pdf)


=More Information=

#http://www.worldacademy.org/node/1769: conference/webinar on the topic
#a more focused paper than the Sapiens that will appear in February in the special issue of the Journal of Future Studies about the Financial Crisis.

See: [[Is Our Monetary Structure a Systemic Cause for Financial Instability]]? Evidence and Remedies from Nature. By Bernard Lietaer, Robert E. Ulanowicz, Sally J. Goerner, and Nadia McLaren. Accepted for publication in Journal of Futures Studies Special Issue on the Financial Crisis (February-March 2010)



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