Bernard Lietaer - The future of money

developments in the currency markets in particular have a series of implications that I divide under three headings: - Power shift - Increased volatility - Stable or unstable, that is the question Power shift A major power shift in the world system has already occurred.

Every government in the world, including the most powerful ones, such as the US, is actually being policed by the global foreign exchange markets. If a government anywhere in the world dares to challenge these financial diktats, capital flight will almost instantaneously force it back into orthodoxy. President Mitterrand in France in the 1980s;John Major in Britain and the Scandinavians in 1992; the Mexicans in 16~84; the Thai, Malay, Indonesian, or South Korean governments in 1997; the Russian in 1998 - all paid the hefty price that is extracted under such circumstances.

Even Business Week concludes: 'In this new market... billions can flow in or out of an economy, in seconds. So powerful has this force of money become that some observers now see the "hot-money" (funds that move around quickly from one country to another) becoming a sort of shadow world government - one that is irretrievably eroding the concept of the sovereign powers of a nation state.' The trickiest times occur when power shifts. They are by definition times of uncertainty. The form of uncertainty that central banks and other guardians of monetary order fear most is currency volatility.

Increased currency volatility