Home » Credentials of a Flying Fish

Credentials of a Flying Fish

An earlier version of this story can be found in the Preface to The Future of Money.

If I am so passionate about supporting the evolution of our money system, it is because I have spent all my life looking for the highest leverage place for improving all other systems.   And I have found that money is it.   It is a key acupuncture point when it comes to addressing most things we human beings care about  such as having access to good quality health care, nutrition, housing and education and participating meaningfully to the life of our communities through work we enjoy.  

My main qualification for talking the way I do about money is that for the last thirty years I happen to have been exposed to an unusual variety of hands-on experiences of money as a system.   This was not part of any conscious plan on my behalf.  It just happened as I moved from one career step to the next. I now realize that my successive professional activities have given me five very different perspectives on money, and that each has changed what I thought about it before. It is this combination of experiences which has turned me into an unusual observer of the money system.   So, here is an overview of my life’s journey and the different perspectives I have acquired along the way.

MIT and the Collapse of the Gold Standard

My very first book, the thesis of my postgraduate work at MIT, was about applying quadratic parametic programming to global currency management. Written in 1968-69, it got published in 1970 by MIT Press because it was one of the very first applications of systems theory to international finance. It described how to optimize currency management for corporations working in a large number of countries and currencies. It included the description of how to deal with “floating exchanges,” at that time a rare occurrence limited to some exotic currencies in Latin America.

When President Nixon decided unilaterally to change the global monetary system in August 1971, by unhinging the US dollar value from its gold standard, he inaugurated a new era of universal floating exchanges, which is still prevailing to this day. The techniques I had developed for some marginal currencies suddenly became overnight the only systematic research relating to how to deal with all the major currencies in the world. At that time, I was a fledgling management consultant. A major US bank negociated exclusive rights to my approach. Our agreement required me to train a group of people at the bank first , and precluded me from remaining active in this particular field for a period of five years. So I was obliged to start a career in another field.

Peru

I continued to specialize in whole systems analysis, but focused on areas other than floating exchanges. One of my major new clients turned out to be the largest mining company in Peru, and after the nationalization of the entire mining sector, the Peruvian government itself.  The assignment was to develop computer models that would maximize hard currency earnings from allocating mining productions and concentrates on a global level. This turned out to be a very successful project at the technical level. At its fullest development over two-thirds of all foreign exchange earnings of the country were optimized by my models. However, when I found out that all the proceeds of my project were used just to buy some squadrons of the French Mirage Dassault planes for the Peruvian military, I felt that my work had become meaningless. If I wanted to work for the benefit of a Dassault, there had to be better places to do it than the Central Sierra in Peru. Furthermore, my research in the mines had made me aware of the human effort and pain this kind of work exacts in the higher regions of the Andes , and that military toys just didn’t make sense in the light of the real problems facing the country.

Back to the Ivory Tower

Therefore, toward the end of 1975, I decided to change professional direction, to take a “reverse sabbatical”, i.e. become a Professor of International Finance at the University of Louvain, the oldest university in my native Belgium. I taught in order to gain a broader perspective on Latin American development, and specifically to discover the systemic reason of what I had observed in Latin America: the sudden and troubling accumulation of foreign debt by all countries in the region. Out of this sabbatical appeared several books including the first book (written in 1975-78 and published in 1979), to announce the Latin American debt crisis. This debt crisis exploded on schedule in the early 1980’s (4).

A hands-on experience at the epicenter of the money system

As I was finishing this research, out of the blue came a job offer to head the organization and computer department at the Central Bank in Belgium (the institution in charge of managing the national currency, akin to the Federal Reserve for the U.S.). As I had just found out that the Latin American debt crisis was due to an underlying structural flaw of the monetary system itself, I thought that this position could be ideal to verify whether it might be possible to improve the system from within. My very first project–the design and implementation of the brand new European Currency Unit (then called Ecu, now the Euro) –looked like a promising first step in such a direction. Another relevant learning environment was my role as President of the electronic payment system of the country, considered the most inclusive and cost effective payment system in the world.  However, it took me several years, and a most revealing conversation with the then President of the BIS (the Bank of International Settlements in Basle, or the Central bank of the Central banks, which coordinates the monetary activities of the eleven key monetary countries of the world), to understand that “Central Banks exist to keep the system going as is, not to improve on it” and that therefore any initiatives of reform would have to come from the private sector.

Speculating for Change

This insight sealed my decision to leave the Central Bank after five years. Having been game warden, I became poacher, as one of the co-founders for one of the first large-scale off-shore currency trading funds. During the three and a half years I was its General Manager and Currency Trader (i.e. from its inception in 1987 to May 1991), the largest of these funds (Gaia Hedge II) was the top performing managed currency fund as well as number one among all off-shore funds. We almost tripled the money in three years, which put us at the top of the Micropal survey of 1800 offshore funds. The trading system used provided a continuously feel for the pulse of the twenty-two major currencies in the world, and enabled us to take simultaneous positions among them all. While I learned a lot when the speculative systems were working well, I learned even more when they were not.

Since then

In summary then, I happen to have been intimately involved in looking at the global monetary system from five different perspectives: successively from a multinational corporation to a developing country viewpoint, from an academic to a hands-on central banking and currency speculation viewpoint.   While many people have had one or several of these experiences, the combination of all five is a lot less usual.  Every one of these experiences forced me to thoroughly reconsider what I thought I knew about money.   Together, they required that I figure out how to integrate  basically mutually incompatible viewpoints.  My career moved me to the extreme ends of observation on the spectrum, and made me think about money and our money systems in a different way than most people.

Since my days at GaiaCorp, I have been teaching and consulting worldwide on the merits and shortcomings of different money systems.  In 2006, Sally Goerner introduced me to Professor Robert Ulanowicz and his  quantitative measures of structural conditions under which any complex flow network can be sustainable. His work explains why monocultures are structurally unstable, for example.  Our money system, and our entire global economy, are precisely like a monoculture imposed on such a complex flow network, and is therefore structurally instable, as explained in an article which we co-authored.

I have therefore become an advocate of the creation of more diversified money systems.  Such a system would include the creation of a global complementary currency that is nobody’s national money (e.g the Terra), several mutual credit systems for businesses (e.g. regional C3s), and a multitude of local and specialized social-purpose currencies.   The perspectives and recommendations I offer on this site, and the ideas I discuss in my books, articles, talks, and interviews, are deeply informed by each and all of my learnings about this mysterious thing we call money.

I often say that money is to us like water is to the fish: it is such an intrinsic part of our environment that we hardly notice it.   We rarely ask how it works, even after it has collapsed on us. We even more rarely reflect upon the way it shapes our lives.   I sometimes feel like a flying fish who accidentally has had the opportunity to take a ‘bird’s eye view” of the water in which we swim, and is now trying to report back to its fellow fish what it has learned about what we usually cannot see.

Bernard Lietaer

For a more formal version of Bernard Lietaer’s credentials, please see his curriculum vitae.