An earlier post informed us that Scotland’s David Low had decided to buy control of Scotcoin, which uses the same public database ‘blockchain’ technology as bitcoin. The USA has classified virtual currency as an asset for tax purposes and Israel has issued a draft which considers Bitcoin an asset, imposing VAT and capital gains tax on bitcoin transactions.
Now Japan has officially recognized bitcoin. New legislation that legitimizes digital currencies came into effect today (Saturday 1st April). The country’s financial regulator says bitcoin is fulfilling the function of a currency. More information on how it works is given here and about its advantages and disadvantages here.
The first bill containing provisions for virtual currencies including Bitcoin, submitted to the Diet last March, amends the existing Payment Services Act and the Act on Preventing of Transfer of Criminal Proceeds. It defines virtual currencies including bitcoin and imposes certain regulations on virtual currency exchange services in order to prevent money laundering and terrorist financing as well as to protect users.
Ken Kawai of Anderson Mori & Tomotsune, a leading Japanese law firm confirmed that though Bitcoin is not considered a currency, being recognized by the government as a payment method will “likely have a positive effect on people’s mind and facilitate usage of VC’s [virtual currencies]”.
Japanese exchange Coincheck has revealed that its user base has risen from 14,000 users last April to 76,400 in January and there was rapid growth in the number of bitcoin-accepting merchants using its service. Japanese giant GMO Internet group has recently announced that it would be developing a bitcoin exchange and wallet service. Japan now has the second-largest bitcoin trading volume globally, according to Coinhills.
In a recent message, Professor Huber directs readers to two sections of his website where ‘various path-breaking contributions’ to the current discussion about central bank issued digital cash, include:
Monetary Workarounds. Central bank digital currency and sovereign money accounts. Intermediate approaches to sovereign money reform See: www.sovereignmoney.eu/monetary-workarounds-digital-currency-and-sovereign-money-accounts.
Since about 2013/14 scholars have been looking for an intermediate or gradual approach to monetary reform. If a ‘big bang’ transition from private bankmoney to sovereign central-bank money could not be achieved anytime soon, something less radical might be attainable. The two approaches being in the spotlight are
► central bank issued digital currency (CBDC) based on blockchain technology, and
► sovereign money accounts as an alternative option to bank giro accounts.
Further ideas relate to:
- central bank accounts for everybody
- mobile use of sovereign money accounts
- helicopter money
- safe deposits by way of a voluntary 100% reserve on individual deposits.
The common feature of the former options is to introduce non-cash central-bank money into public circulation, but without directly challenging the present bankmoney privilege. The idea is about giving the nonbank public the option to choose between bankmoney and central-bank money. The two would exist in parallel. By some supporters such an approach is idealised as ‘combining the best of two worlds’, while others, more appropriately, hope for the approach to be a half-way house to full-blown monetary reform that would put an end to the bankmoney privilege. Over time, the central-bank money in public circulation would possibly drive out the bankmoney, thus reverting the historical wrong-headed development of the last hundred years by which bankmoney has driven out sovereign money to about 90% now.
This attractive picture of the Hermann Safe can be seen on the website, though its significance is not apparent to the writer.
Continue reading > Monetary Workarounds. Central bank digital currency and sovereign money accounts or print out as > PDF
Mure Dickie in the FT, writing from Glasgow, explains that currency policy became a central issue in Scotland’s 2014 independence referendum.
David Low, chairman of Lowdit Partners, a Glasgow entrepreneur, accountant and financial adviser, is withering about the financial system:
Why would anyone trust the banking system? The banking system is corrupt, the banking system hasn’t changed in 300 years, it’s still run by the elite. Every link in the banking chain from the central bank down, someone is taking a cut, someone is taking a margin, everyone is taking a clip.
The western economy is bankrupt, financed by the electronic printing of money, which Carney is using to buy debt off the people, the banks, the people who created the problem in the first place. It doesn’t filter down. It just circulates among the elite, it doesn’t filter down to the people who didn’t cause the problem, the people who are bearing the brunt of austerity. They are paying the price of the people who actually caused the problem.
And the people who caused the problem are solving the problem not with their own money but money given to them in newly-created electronic money by the Bank of England.
Mr Low decided to buy control of Scotcoin, which uses the public database ‘blockchain’ technology like the pioneer bitcoin, because he believes that as the use of digital money grows it will come under a regulator and those in the blockchain will have to register and be identified. Like other cryptocurrencies, it is based on a shared encrypted record of transactions, promising greater security and lower costs than traditional banking and settlement systems.
He dismisses the SNP plans to continue to use the pound and Bank of England after leaving the UK: “An independent Scotland, if it wants to have half a chance, must have its own currency,” he says. The FT article records various inducements to encourage people to take up the Scotcoin currency.
A 2015 report for the New Economics Foundation and Scotland’s Common Weal thinktank argued that adoption of a parallel digital currency exploring the creation of ScotPound, a new digital currency would help Scotland to address inequality and increase spending power.
The Scottish Monetary Reform group says leaving the UK would be an opportunity to set up a new Scottish central bank would have direct control of supplying new money, fixing interest and exchange rates, capping the national debt and reducing the influence of financial speculation.
After the 2008 global crisis had shaken confidence in the status quo, Scotland’s independence referendum further stimulated thoughts about adopting different monetary systems.
John Nightingale sends a review of “Dethroning Mammon: Making Money Serve Grace”
Justin Welby is concerned that in the last few years money has become the measure of all things and has distorted values in the process. He contrasts the selfishness, calculation and illusion of control, when financial procedures become dominant, with the generosity shown by God in the hope that we will accept it and share with others.
The titles of his chapters aptly set out what he is going to cover: what we see we value; what we measure controls us; what we have we hold; what we receive we treat as ours; what we give we gain; what we master brings us joy. These themes are illustrated by Bible passages, particularly from the life of Jesus, by questions to the reader and by contemporary examples, for example the inability of GDP to measure the value of voluntary work or the needs of future generations.
Here his experience is invaluable. Though he disclaims expertise in theology and economics he has been active in business and church circles and has experienced the tensions between them. At times he gives us personal examples, for instance being frustrated when otherwise good decisions at his workplace were often challenged by the tax department because they reduced the efficiency of, in his opinion unproductive, tax planning.
Readers are called on to examine their individual priorities and their common life as church members. They are also invited to be concerned for the common good; he briefly discusses a number of contemporary issues: the banking crisis, the need for credit unions, the reform of the tax system and the value of international aid and relief. Here he gives excellent introductions which can readily be followed up elsewhere.
What I appreciate is his evident sincerity and the simplicity and vividness of his language. One feels invited to go on a pilgrimage, joining up with a fellow pilgrim who knows he is still learning but is more experienced than oneself.
“Dethroning Mammon: Making Money Serve Grace” by Justin Welby, Bloomsbury, 2016, £9.99
John Nightingale: Jubilee Debt Campaign, Ecumenical Council for Corporate Responsibility, West Midlands New Economics group.
A new year message from Joseph Huber:
“I am happy to inform you about the publication of my new book, ‘Sovereign Money: Beyond Reserve Banking’. It provides a systemic and historical analysis of money and banking and an up-to-date discussion of the approaches to sovereign money reform”.
The publisher is Palgrave MacMillan. On its website we read:
This book provides an introduction and critical assessment of the current monetary system. It begins with an up to date account of the workings of today’s system of state-backed ‘bankmoney’, illustrating the various forms and issuers of money, and discussing money theory and fallacy past and present.
It also looks at related economic challenges such as inflation and deflation, asset inflation and bubble building that lead to market instability and examines the ineffectual monetary policies and primary credit markets that are failing to reach some sort of self-limiting equilibrium.
In order to fix our financial system, we first need to understand its limitations and the flaws in current monetary and regulatory policy and then correct them. The concluding part of this book is dedicated to the latter, advocating a move towards the sovereign monetary prerogatives of issuing the entire stock of official money and benefitting from the gain thereof (seigniorage).
The author argues that these functions should be made the sole responsibility of independent and impartial central banks with full control over the stock of money (not the uses of money) on the basis of a legal mandate that would be more detailed than is the case today. This includes a thorough separation of monetary and fiscal powers, and of both from banking and wider financing functions.
This book provides a welcome addition to the banking literature, guiding readers through the inner workings of our monetary and regulatory environments and proposing a new way forward that will better protect our economy from financial instability and crisis.
Professor Joseph Huber is Chair of Economic Sociology Em. at Martin Luther University, Halle-Wittenberg, Germany. Previously he was Associate Professor at the Free University Berlin and has also held guest and interim professorships at Science Centre Berlin, University of Zurich and Technical University Vienna. Professor Huber is a pioneer of what is now known as ‘green ethical banking’ and is one of the founders of ecological modernisation theory. He has written extensively on monetary policy and reform topics, is a longstanding policy advisor on matters of economic and ecological modernisation and is actively involved in the international movement for monetary reform. Read more about this here: https://www.sovereignmoney.eu/
Sovereign Money: Beyond Reserve Banking may be ordered at Palgrave Macmillan: www.palgrave.com/de/book/9783319421735 or at Amazon www.amazon.co.uk/Sovereign-Money-Beyond-Reserve-Banking-ebook/dp/B01NAHMWXZ/ref=sr_1_1?ie=UTF8&qid=1481555736&sr=8-1&keywords=sovereign+money
In the 19th century, Thomas Attwood, a British banker, economist, democrat and Birmingham’s first MP, argued long and hard that government should counter economic depressions by increasing the money supply and direct this money towards ensuring full employment.
The FT reported on the 7th December that the European Central Bank’s governing council, meeting to discuss the next stage of its QE programme, is being advised by Rick Rieder of Black Rock, the world’s largest asset manager, to move the focus of quantitative easing away from buying sovereign bonds and put money more directly into the economy, funding a wave of new infrastructure spending across the continent.
‘Move the focus of quantitative easing . . . ‘
The idea of Green Infrastructure Quantitative Easing (GIQE) was voiced earlier by MP Caroline Lucas. This concept, first proposed by the Green New Deal Group, basically means investment in a positive green and socially just future.
“In August the Bank of England announced a further £60bn of its quantitative easing programme, taking the total of e-printed money to £435bn, the equivalent of nearly £7,000 for every man, woman and child in the country. Mark Carney is on record as saying that, if the government requested it, then the next round of QE could be used to buy assets other than government debt . . .
“Instead of using this staggering amount of money to prop up the banks and inflate stock markets, property and other assets, the new £60bn of QE should be used to buy bonds from a national investment bank and from local authorities to generate a “jobs in every constituency” programme.
“This would give all people, not just the left behind, a sense of hope about their economic future and should involve decentralised infrastructure projects centred on a decades-long, multi-skilled programme of energy refits of all the nation’s 30 million dwellings, a shift to localised renewable energy, and a rebuilding of local transport, food and flood defence systems . . . and in doing so really tackle the economic insecurity that is pure oxygen for the extreme right”.
With David Bollier, Pat Conaty co-edited a report on how different democratic money and co-op capital systems can be united earlier this year. David worked for years with Ralph Nader in the USA. His summary blog follows and the report may be read in full here. He writes:
One of the more complicated, mostly unresolved issues facing most commons is how to assure the independence of commons when the dominant systems of finance, banking and money are so hostile to commoning. How can commoners meet their needs without replicating (perhaps in only modestly less harmful ways) the structural problems of the dominant money system?
Fortunately, there are a number of fascinating, creative initiatives around the world that can help illuminate answers to this question – from co-operative finance and crowd equity schemes to alternative currencies and the blockchain ledger used in Bitcoin, to reclaiming public control over money-creation to enable “quantitative easing for people” (and not just banks).
To help start a new conversation on these issues, the Commons Strategies Group, working in cooperation with the Heinrich Böll Foundation, co-organized a Deep Dive strategy workshop in Berlin, Germany, last September. We brought together 24 activists and experts on such topics as public money, complementary currencies, community development finance institutions, public banks, social and ethical lending, commons-based virtual banking, and new organizational forms to enable “co-operative accumulation” (the ability of collectives to secure equity ownership and control over assets that matter to them).
I’m happy to report that a report synthesizing the key themes and cross-currents of dialogue at that workshop is now available. The report is called “Democratic Money and Capital for the Commons: Strategies for Transforming Neoliberal Finance Through Commons-Based Alternatives”.
Frances Hutchinson, James Robertson and Joseph Huber posted papers on the Democratic Money Initiative wiki which also includes the report by David Bollier and Pat.
Pat Conaty writes:
“What strikes me about this wonderful paper is how he creatively frames an outline of the new money commons architecture and he approaches this challenge in a multi-level way from global to national to regional. He links insightfully the fossil fuel crisis to the crash in 2008 and also highlights what the late Margrit Kennedy drew attention to, the embedded interest costs in public services and other essential goods.
“What is marvelous about this paper is the way he shows how the work to build resilience through co-operative innovation in community energy, food sovereignty, community land trusts (are implied) and regional currency can be brought together in a synergistic way. He argues for a provisioning system as Mary Mellor and Frances Hutchinson set out so well in the Politics of Money book in 2002. But he also draws attention to the kilowatt hour forms of money and tethering ideas Shann Turnbull has been articulating.”