Since the 2008 global financial meltdown and bailouts, trust is disappearing: in banks, stock markets, corporations, governments, religious institutions, experts, academia, political parties’ rhetoric and even the Internet and social media. This mistrust has fueled global populists across the political spectrum, with ubiquitous signs at their rallies, “Where’s MY Bailout?”  We see the rise of cryptocurrencies becoming bubbles, as many seek alternative stores of value and mediums of exchange they hope will prove more trustworthy than central banks’ fiat currencies: dollars, yen, euros, pounds, pesos backed only by their governments’ promises.

Trust is a precious commodity which undergirds all humanity’s markets, trading and exchange. Trust does not scale easily, abiding in face-to-face, handshake interactions in humanly-scaled communities, based on common agreements, shared infrastructure, resources and culture. Trust does not reside in packages of software, apps, AI, big data or social media platforms, as we learned in 2016. So trust was sought in the blockchain platforms first developed by the mysterious computer expert, Satoshi Nakamoto in 2009 for his bitcoin. Now, over 1000 blockchain-based start-up companies and blockchains underlie the over 1,500 cryptocurrencies traded on electronic exchanges including Coinbase. These computer-based distributed ledger blockchains are designed to engender trust by allowing person-to-person ability to verify each transaction or contract with a permanent record open to all.

Crypto promoters aspire to create global-level trust in the value of cryptocurrencies due to this transparency and their protocols limiting finite amounts to be issued, to create artificial scarcity. This vision is sullied by the many cases of criminality, hacking, stealing, frauds and other shenanigans. Nevertheless, faith and trust in these cryptos remains strong, since proponents say central banks also manipulate their fiats — which is true!  We see fiat money being printed on TV shows! Yet fake visuals of cryptos, such as the shiny golden colored coins are also shown with news about bitcoin. This is a “bit-con” since bitcoin is a digital algorithm, a string of computer code which is unlikely to become a ubiquitous medium of exchange or a store of value.

Still, the allure to libertarians, hackers and speculators is that cryptos exist with no middleman, for peer-to-peer global private use with no governments, no banks or financial intermediaries and few outside rules except those imposed by issuers. Millions of hackers worldwide soon began solving the ever more complex mathematical puzzles needed to claim their next block of newly minted bitcoin. These “miners” now use some 30 terawatts annually of fossil-generated electricity, equivalent to the consumption of a country the size of Ireland, plus gobs of computer power. They are now affecting the Earth’s climate as I described in “Hey COP23: Bitcoin Miners Exploding CO2 Emissions!”

The loss of trust in fiat dollars, pounds, yen, euros, pesos we always use to pay each other cannot be replaced by cryptos—in spite of the current hype, as traditional financial markets now trade bitcoin futures and ETFs concocted by eager Wall Street players.  Nations including Russia, North Korea and Venezuela under international sanctions for violating norms, are now issuing their own cryptos to escape financial controls set by governments for fiat currency transactions. How will this war between governments and libertarian hackers’ cryptos versus fiats work out?

Clearly, trust in all forms of money is fading. Today, people barter more goods and services on electronic platforms, swap and match, often directly without any use of currencies on platforms like Freecycle, and for everything from baby-sitting, sharing garden tools, spare rooms, vacation homes to finding their true love matches! The familiar fiat currencies we still spend our lives earning, investing and saving for our retirement are losing their dominance in our lives and with that their role as a promised store of value. For example, few fiat currencies remain stable, as we see on FOREX trading screens daily. Even our US dollar has lost about 80% of its value over the past 30 years— due to inflation, budget deficits, interest payments to bond-holders on our national debt, which recent tax cuts may increase by another $1.5 trillion.

Most US and European citizens register disbelief when they learn that all their national money in circulation is created out of thin air by private banks when they create loans and is therefore only backed by other peoples’ debts, not gold or any other commodity of value! Governments in Britain, the USA and most countries gave their sovereign power to coin their own national money away to their private banks and allowed them to charge interest on their loans as well, as Ellen Brown explains in “Web of Debt”, (2010). Our TV Special “The Money Fix” details on how this happened in the USA with founding of the Federal Reserve in 1913 and the rise of local currencies, barter and credit circles.

Governments’ policies became ever more erratic, swinging between obsolete textbook policy prescriptions: either “stimulation “(quantitative easing QE, i.e. money-printing, tax cuts, lowering interest rates, buying dud mortgage-backed securities) or “austerity “(cutting safety nets, education, healthcare, public services, selling off public assets) while continuing to bail out too-big-to-fail firms without prosecuting their reckless executives. Ethical Markets dissects such obsolete economic policies and offers more realistic alternatives (www.ethicalmarkets.com).

Today, failing policy levers are being bypassed by the rise of cryptos, crowdfunding, peer-to-peer lending, electronic barter, information-based direct trading I describe in “FINTECH: Good and Bad News for Sustainable Finance”.  They reveal the stunning truth: Money Is Not Wealth and worse, it is no longer a reliable store of value!  All those dollars we pinched to save for our retirement are losing their value until we use them to buy something useful, and shift our investing from obsolete, polluting, unsustainable corporations into trustworthy, sustainable, well-managed and transparent enterprises so we can monitor their performance and social impacts ourselves.

As the shock of this reality sets in, it reveals how most financial market players try to make money out of money, trading stocks with each other which are tradeable contracts issued by big companies as explained by law professor Lynn Stout in “The Shareholder Value Myth”, (2012). The latest Wall Street bubbles are index-based stocks and ETFs, reaching additional levels of abstraction. I first unraveled these truths in “Creating Alternative Futures” (1978,1996) and “The Politics of the Solar Age” (1981,1986). I described the essential unpaid tasks underpinning the cash-based sectors measured in GDP and incomes of mostly male “breadwinners”. Textbooks designated their wives to perform all the work of maintaining households, raising the next generation, caring for elders, volunteering in community service —all unpaid, as in this diagram (Cake). Economic textbooks described all this vital productive work I called the Love Economy as “non-economic”!

Feminists emerged worldwide to insist this work be recorded and paid, as in Marilyn Waring’s “If Women Counted” (1990); lawyer Riane Eisler’s Caring Economy campaign and Kate Raworth’s “Doughnut Economics” (2017). I documented how thousands of communities around the world starved by their central governments of fiat currencies by austerity programs, simply created their own local currencies, like the famous “Berkshares” issued by the Schumacher Society and circulated, even by local banks in Great Barrington, MA. These townsfolk realized that using their own local currencies and credit could clear their local markets and employ their people meeting local needs. Photographs of thousands of such local currencies issued all over North America and Mexico are catalogued in, “Depression Scrip of the United States 1930” (1961). They taught a key lesson: money cannot be a store of value –it must circulate in the community in order to meet needs and create jobs and prosperity. To assure these currencies were not saved, but spent, they all carried expiration dates and require stamps to re-validate them regularly affixed until they finally expired.

So this myth of money as a store of value is now threadbare. Electronic platforms open up new possibilities for direct barter, with all the fintech exchanges now disrupting traditional finance and banking. These innovations offer hope that both cryptos and fiats may eventually be properly managed and regulated in the service of decentralized prosperity and focus on the new model; the UN’s Sustainable Development Goals (SDGs) now ratified by 195 governments. Accountants are renovating their models for information-based economies  where services account for some 80% of production: from unpaid voluntary work to intellectual property, R &D, design, brands, networks, “infostructure” (broadband, internet) and institutions, described in “Capitalism Without Capital” (2018). The International Integrated Reporting System (IIRC) models six forms of capital: finance, built facilities, intellectual, social, human and natural capitals, which then measure the extent to which companies and governments enhance or degrade all six forms. This accounting revolution also from the Sustainable Accounting Standards Board (SASB); the Chartered Institute of Management Accountants www.cimaglobal.com, (ICAEW) finally discloses and internalizes all those “externalities” into companies’ balance sheets and provides full spectrum accounting— beyond money as the single metric. Honest money: currencies fully backed 100% for example, by kilowatt hours of renewable electricity, productive assets and services can continue to be useful as mediums of exchange. Expert Shann Turnbull in “Is A Stable Financial System Possible”, shows why currencies cannot be a predictable store of value, i.e. money is not wealth.

Cross-posted with permission from Ethical Markets.

Photo by reynermedia

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The Renewable Energy sector is growing strongly as fossil fuel becomes less appealing in light of cost parity of renewables, limiting carbon emissions and driving evolution to sustainable societies. In Energy Efficiency, widespread ripple effects positively impact jobs creation, manufacturing and other metrics tracked by traditional GDP and integral to transition management.

The following text was sent to us by noted author and futurist Hazel Henderson to highlight the release of Ethical Market’s new Green Transition Scoreboard report, which you will also find embedded at the end of this blog post.

After decades of pursuing my life’s work helping guide Mother Earth from the Fossil Fuel Age to the Solar Age, efforts of colleagues and RSA Fellows like myself such as Chris Oestereich, Chandran Nair, Michel Bauwens and other pioneers, are driving the necessary change. On Earth Day, the United Nations held a signing ceremony for the UN Paris Agreement, with signatories pledging to finance and implement programs to limit climate change, aligning with the UN Sustainable Development Goals (SDGs).

On the same day, Ethical Markets Media released its Green Transition Scoreboard® (GTS). As of Q4 2015, the GTS totals $7.13 TRILLION cumulative in non-government investments and commitments tracked since 2007 in the global green transition now underway. As president and founder of Ethical Markets, I wrote the detailed overview of the 2016 report, “Ending Externalities: Full-Spectrum Accounting Clarifies Transition Management”, focusing on the top priority: eliminating “externalities” which the IMF estimates at $5.3 trillion annually worldwide and drawing from the work of Chandran and many others. Companies tracked since 2007 by the GTS are those avoiding negative externalities and focusing on transition management to low-carbon economies agreed on at COP21 in Paris, 2015.

The GTS covers substantial capital investment in areas which my years of research as a science advisor and which the Ethical Markets Advisory Board expertise, including Michel’s, indicate are strongly contributing to the growing green economy. The GTS tracks Renewable Energy, Energy Efficiency, Life Systems, Green Construction and Corporate Green R&D. Fintech for sustainability, a new subsector, includes peer-to-peer lending and crowdfunding, in addition to subsectors tracking the system-wide interconnections among information and digitization, water, food, education and health.

Ethical Markets Media (USA and Brazil), Certified B Corporation, is a micro-multinational social enterprise with the mission of reforming markets and metrics while helping accelerate and track the transition to the green economy worldwide. We strictly define ‘green’ by omitting technologies such as nuclear, clean coal and most biofuels while carefully assessing rapidly advancing technologies such as nanotech and IoT (Internet of Things). Sources of financial data are screened by rigorous social, environment and ethical auditing standards.

The upward trend in investments since 2007 aligns with our recommendation to invest at least 10% of institutional portfolios directly in companies driving the global Green Transition. Updating strategic asset allocation models serves both as opportunities and as risk mitigation.

The Renewable Energy sector is growing strongly as fossil fuel becomes less appealing in light of cost parity of renewables, limiting carbon emissions and driving evolution to sustainable societies. In Energy Efficiency, widespread ripple effects positively impact jobs creation, manufacturing and other metrics tracked by traditional GDP and integral to transition management. Life Systems encompasses broad areas systemically linked, including water, remediation, waste and recycling, green infrastructure and info-structure, community investing and education, investments often overlooked as too small. Green Construction ranges from “low-tech” passive solar buildings to “high-tech” flow 3D printing. For consistency, we omit labor, thus undercounting a form of capital which intrinsically increases the value of green construction. Corporate Green R&D is powered by the automotive industry and also heavily weighted in favor of energy generation, conservation and distribution with a precipitous decline in fossil fuels P&E.

We track nearly a $1 trillion invested in the green transition every year! With great hope and pride, I’m pleased to spread the good news that the Solar Age is here.

Ending Externalities: Full-Spectrum Accounting Clarifies Transition Management by P2P Foundation

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