Central Banks, Money and Morality

Aug 10, 2020 by

Today in the Wednesday Session, we had a few minutes to discuss the lectures of Bernd Villhauer and Beat Weber, separated into groups. The live discussion with Bernd Villhauer and Beat Weber started with an overview about money. It was interesting to follow the explication how and who creates money, about local money, the influence of markets, and also digital money like cryptocurrencies. Money in capitalism is created from commitments to future economic activity evaluated by markets. Furthermore,  the explanation by Beat Weber about moral money in companies, carbon taxation and carbon trade was interesting.  Also, the explanation about the purpose of Central Bank Digital Currency (CBDC) and green concerns because, ecological issues of credit commitments underpinning money increasingly become an object of public debate. The most interesting part was about local currencies, consumption of local goods, because most of us never have heart about any local currency. It was new to us in how many countries empirical evidence says that currency like euro or dollar in USA have different interest. For example, in Europe there are many countries which use the euro currency, but each country has different interests. Local and national currencies could foster the global common good. Additionally, the introduction of a global currency has various potentials such as increasing the common good, making profits, or gaining power over the world. Therefore, it is necessary to make a common goal. Central banks and commercial banks should be more sustainable. I really agree with all of topics and comments, especially that what we need is a more decentralized bank system in order to promote a sustainable financial market.

Excerpts from the discussion:

The session started with a basic question about money creation, to which Beat Weber said money is created and released into the economy by a two-tier system consisting of the central bank and commercial bank. The production and distribution of money is in line with the general principles of the economic system. He said – quote: ‘money is just a piece of a puzzle in a wider puzzle and if we change the part of the puzzle too much it does not fit the puzzle and it will be left out’, to which Bernd agreed. Helga added that the decision about who gets a loan is essentially based on monetary and risk issues and that this is what makes the monetary system and economy insensitive to planetary boundaries.

Furthermore, Beat clarified his comment on “money for free”, meaning that if central banks would hand out money for free (without an obligation to repay or to pay interests), then money would loose its value and not be accepted anymore by private property owners. What was meant is that central banks are able to provide credits at zero interest rates, if the economic situation requires to do so.

Specifying CBDC, Beat explained that this an electronic version of cash. Therefore, CBDC would be a form of national currency that would be tied equally to the national currency’s value. He added that it could be exchanged or loose value in the same way that cash does. The digital money will be also subject to trading and devaluation pressure, depending on the different motives of the different countries.

Bernd said local currencies help in stabilising the economy and help the central bank in its tasks (like maintaining money flow into the economy and limiting it to go out of the economy). He also talked about global currencies and said we need to rethink money in terms of what is necessary to make it a common good. He also added that common good does not mean that it is only for humans. The common good also means flourishing the diverse ecosystem.

The session concluded by specifying how financial markets are structured and modelled by political unethical forces and Bernd said that the central bank should decide about the values and strategies regarding markets.

To the question “Can cryptocurrency be a solution?” they responded briefly that cryptocurrencies like private money cannot be made available like fiat money. Cryptocurrencies are used only for speculation. They are unstable and not part of any solution, they are a part of the problem. And they said that it is not possible to keep the quality criteria of cryptocurrencies – therefore it is a super capitalist money and it cannot be a hope.

Written by: Manu and Maria Z.

Based on the session with Bernd Villhauer and Beat Weber during the AEMS 2020.