Why the EU’s Fiat Currency System Must Fail

[Y_Participant 4591]

It started as the “Greek Debt Crisis” in April 2010 for a €45 billion debt for the fiscal year alone and €115 billion for the next two years to cover a 170% debt-to-GDP ratio. On 2 May, the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) – (the Troika) – launched a €110 billion bailout loan to rescue Greece from sovereign default.

Then markets progressively realised Ireland (Nov 2010 – €67.5 billion or 124%), Portugal (Mar 2011 – €78 billion or 125%), Slovenia (Jan 2011 – €22.4 billion or 63%) , Italy (Jul 2011- €124 billion or 123%) and Spain (Sep 2012 – €100 billion or 85%) were in bad shape. In March 2013 Cyprus (€10 billion plus €12 billion bail-in or 126%) had run into similar trouble as well.

Now heralded as the European debt crisis (also referred to as the Eurozone crisis or European sovereign debt crisis), this is major financial institutions in member states unable to repay external debt. The governments of these nations declared full or partial insolvency – requiring monetary liquidity from creditors to meet the terms of their outstanding financial commitments under their existing economic and social structures.

The Euro is the only currency used by the institutions of the European Union and a dual currency used by the Eurozone states, which account for 19 of the 28 member states of the European Union. All but two states – Denmark and the United Kingdom, through a legal opt-out from the EU treaties – have retained the right to operate independent currencies without adopting the Euro.

It was always blatantly clear that an EU monetary union would inevitably require a political union to centralise decisions about tax and public spending. The currency has become so damaging and divisive that public opinion will now never tolerate a political union. It has sent countries like Italy, Spain, Portugal and Greece into recession –or worse – while the commercial banks and other countries got richer.

Noted economists associated with the Austrian School of Economics, Modern Monetary Theory and other post-Keynesian systems, condemned the design of the Euro currency when it was applied to nations with totally different economic policies and growth models.

Forcing the same interest rates and exchange rate leads to a destabilising effect – the nations with higher exchange rates to the Euro have a permanent per capita income lower now than when in their own currencies.

An example – the average German is about 20% better off as the Euro is a cheaper currency than the Germany Mark would have been if it still had the deutschmark, while it is more expensive than Italy would have if it still used the Lira. Germans therefore keep exporting easily and running up a surplus, while the Italians struggle and go deeper into debt.

In Southern Europe goods and services are now un-competitively high relative to northern European ones when compared to their original currencies and interest rates. Wages follow this rise for a short time. This may appear great in the beginning when banks are at the height of lending and storing up debt.

Without a separate Central Bank to regulate the value of the Euro, their goods and services are uncompetitive in the Euozone, inflation is high and bubbles form in the housing and banking sectors. The economy crashes once the debts cannot be offset by real growth in the economy.

The freedom of movement of capital makes this worse – why would you put your euros in an Italian bank when you can invest them in Germany? Membership of the EU has thus put a few countries into more wealth and others into a recessive economy.

Once a certain bubble bursts and some financial institutions become insolvent, this causes a contagion that freezes up the whole banking system – there is no other recourse but for governments to take on the repayments to creditors mainly by austerity measures – reducing wages, restructuring companies (a nice term for layoffs) and selling off assets. However the same problem of imbalance remains in the economy and investment capital takes flight during a recession.

Borrowing debt to pay off previous debt becomes the only solution while the single currency is in force. Bail-ins are forced to partially pay off some of the debt so banks can stay solvent and maintain sufficient liquidity and velocity of circulation.

Austerity has increased debt burdens across southern Europe, because it’s reduced growth more than it has reduced borrowing costs. And now northern Europe is in trouble. France just missed its deficit target, and is set to slash more spending; the Netherlands has put through contentious tax hikes and spending cuts, even as its economy has shrunk; and even Germany is contemplating new budget-saving measures. In other words, the Euro has become an austerity suicide pact.

Excluding Germany, just over half of all euro trade is with each other. But with bad policy pushing southern Europe into depression and northern Europe towards recession, EU countries can’t afford to buy as much stuff from each other. That adds a degree of difficulty to recovery for southern European countries that need to export their way out of trouble.

Another country’s problems can quickly become your own if your banks are bigger than your economy. That’s the lesson Cyprus learned the very hard way after its banks loaded up on Greek debt in 2010, only to get wiped out a year later. This is the domino theory or contagion of an incestuous banking system – where banks loan to and borrow from each other without restriction when within the EU.

And in spite of all this – no one dares look at the elephant in the room. The ECB has been providing liquidity to the banking system by Quantitative Easing measures and adopts a zero interest rate approach with no end in sight. The Euro’s devaluation in the context of the resurgent US dollar may signal a loss of confidence in the currency and a flight to US treasuries. Under those conditions it would be impossible to maintain bank liquidity under the current conditions and a currency collapse may eventuate.

The Eurozone is a burning building and structured so that its populace were never meant to leave. What is more, they are barricaded in. If they contemplate leaving, they have to face not having any notes and coins of their own; the need to default on debts that will be even bigger when any new currency goes down in value; and the collapse of affected banks because being in the Eurozone means they were able to borrow money they should never have been lent.

Brussels and the ECB seem content to do just enough to keep everything from falling apart and nothing more. Indeed, it’s how they try to keep the pressure on the southern bloc to push through unpopular labor market reforms. But doing enough today eventually won’t be enough tomorrow if the southern bloc doesn’t have any hope of recovering within the Euro. The politics will turn against the common currency long before that.

Main references

https://en.wikipedia.org/wiki/European_debt_crisis#Ireland
http://www.tradingeconomics.com/italy/government-debt-to-gdp

IN DEPTH: THE SOON TO ERUPT EURO EXPERIMENT

[Freeman_KParticipant 3524]

Y_ wrote:

Austerity has increased debt burdens across southern Europe, because it’s reduced growth more than it has reduced borrowing costs.

See, problem with such opinions is that they are nothing more – opinions. Statement above is a clear logical fallacy used widely by left wing trying to justify their economic policies of running high budget deficits on top of high public debt. Why the f~~~ should someone from Estonia subsidize someone from Greece ? “Austerity” is nothing but natural balancing of corrupt ideas from left wing.

The choices we make, not the chances we take, determine our destiny

[Y_Participant 4591]

Hi Freeman_K

Thanks for reading – and a clarification on my post.

I never said austerity was good or bad. I just pointed out types of measures that were adopted and their intended or unintended consequences.

Sometimes I quote perceived views. I try to be objective, to be fair to the reader. It may not always be possible 🙂

In all these cases everyone has the right to their own opinions and I hope this forum allows us to air our views and discuss issues.

All the best.

[It’sallbsParticipant]

The Euro like the EEC and then the EU were created for the benefit of the German Economy. Teh inconvenient truth is WW2 was about the German economy and Adolf and Herman discussed, “how to dominate the peace” and always planned a united states of Europe. of course the Media will tell you anyone who says that is a lunatic racist. And most of the brainwashed believe the appalling organisation called the BBC. Before the EURO was the ERM. The ERM was a semi fixed exchange rate pegged against the mark and it destroyed Britain and put us into along deep recession. The same idiot who kept us in the ERM are the same ones who wanted us and to this day still say we should join the EURO. We were lied to by teh suspected satanist Ted Heath in 1975 and we were dragged into a political union which destroyed countless British industries from fishing to aluminium over 4) years. Btu of course it is trendy to believe the media and attack anyone who knows better. Teh situation Greece fell into is very similar to what th ERM did to Britain. And of course in all this you can guarantee the leader that will try to do Britain the most damage (as always, will be the French one.

http://www.leavemeansleave.eu

[Jan SobieskiParticipant 28791]

Fiat currency allowed people to print as much money as they want.

US is 20 trillion in debt.

Love is just alimony waiting to happen. Visit mgtow.com.

[Greg HondaParticipant 6406]

@ Yumbo,

I enjoy your posts and respect your ecconomic knowledge.

I have a few thousand pounds I could invest and I want my money to be safe. I intend to buy Gold and Silver coins and store them myself in a seccure location.

I can’t see the point of leaving my money in the bank as the interest rate is less than zero but inflation must be at least 10% and rising so my money slowly evaporates.

Do you think my plan to invest in Gold and Silver coins is a wise one?. I intend this to be a way of preserving my wealth long term rather than trying to make a quick profit.

What advice would you give?

It's Time to get Wise

[PistolPeteParticipant 27143]

Excellent post (again) Yumbo.

Y_ wrote:

It was always blatantly clear that an EU monetary union would inevitably require a political union to centralise decisions about tax and public spending.

I thought this was the key statement. I think Brussels desires an economic collapses precisely to bring about a political union of sorts. Countries (other than the US) would never sacrifice their sovereignty unless compelled to. And in the event of collapse the notion of a “unified Europe” riding to the rescue might gain traction. OF course it will ultimately fail when the money from wealthy countries runs out.

We have that problem in this country. States like California are in debt they can never get out of—but relax we have Uncle Sam and the money from all the other states available to underwrite California. So why should someone form Alabama be forced to pay for the give-aways and freebies in California? HA we won’t because Uncle sugar is so far in debt soon it to will be impossible to repay.

[It’sallbsParticipant]

There already is apolitical union, several treaties were signed. There is already and Eu anthem and the eu army is very real.

http://www.leavemeansleave.eu

[It’sallbsParticipant]

every single country in th EU gave up it’s sovereinghty.

http://www.leavemeansleave.eu

[PistolPeteParticipant 27143]

It’sallbs wrote:

There is already and Eu anthem and the eu army is very real.

Holy s~~~ when did this happen? Am I that out of the loop? Maybe I was passed out on the floor when this happened.

[It’sallbsParticipant]

Why do you think 17 million of us voted to leave? The EU is very much apolitical union. It happened back in 1975 and advanced further when the Maarstricht treaty was signed in 1992. Thanks to the eu it took us years and million and millions of £s to deport people who had bee preaching hatred and terrorism in this country for decades. Plus despite all the special snowflakes and the media trying to brand us all racist freedom of movement with no or very little checks is dangerous for security.

http://www.leavemeansleave.eu

[Y_Participant 4591]

@ Greg Honda

You are too kind Sir – thank you. I am only a recent student of economics and learning day-by-day.

I can try to provide information that I hope will be of help to you. I truly believe a well-informed man like yourself is the best person to make decisions on your own behalf.

My views are these:

There is a coming financial crisis where the fiat currency system will be replaced eventually by a partial gold standard.

In the interim there will be fiat currency devaluation, possible attempts at wealth confiscation (may include gold and silver) and a change of world reserve currency to the IMF SDR from the US Federal Reserve Note.

In my view (following the real pundits) this will happen within the end of this decade.

I have placed a sizable portion of my own assets in gold and silver as I do not need these and they will be protected in the coming devaluation and crash for sure. However I do have assets in cash outside the banking system (for the short term) and another portion in funds outside the US which I believe will survive.

If you do decide to buy gold and silver there is only one reason to do so – for wealth protection. You also need to decide the fraction of your wealth you want yo store in gold and silver and what type of bullion – jewellery is also a good option as it can cross borders.

In the short term the value of these metals may SEEM to lose value, but in actual fact this is not so.

Please read Mike Maloney’s “Guide to Investing in Gold and Silver” which gives you all the information you need what to buy, how to buy and where to buy.

Also I recommend Jim Rickard’s “A New Case for Gold”

Look through my previous posts in this forum for the ‘Hidden Secrets of Money” videos by Mike Maloney and interviews with Jim Rickards and the Hon. Ron Paul.

These websites should help:
https://goldsilver.com/
https://dailyreckoning.com/

Message me if you need anything else I can help you with.

At this point in time gold and silver are in a pullback so you have a good window to purchase.

Lastly and perhaps the most important – DO NOT TELL ANYONE
This is an imperative.

I wish you luck Sir.

[It’sallbsParticipant]

http://www.leavemeansleave.eu

[Y_Participant 4591]

Hey PistolPete – haha yes there is an EU anthem and army.
Glad to see you again pal.

[It’sallbsParticipant]

And a flag and the EU commission president is unaccountable and has more power than any Prime Minister or President. The accounts have not been signed off for decades, there is a private shopping mall, 4 presidents, they operate for a few weeks in brussels them pack everything into lorries and drive it all to strasbourg and work there for a bit then drive it all back again. The buildings are on grandiose scale and of course this costs billions that is funded by the tax payers of the member states. It is very reminiscent of the old soviet union.before the eu 12% of world clinical trials happened in britain it is now less than 1% thanks to the eu, the list of destroyed industries is long.

http://www.leavemeansleave.eu

[PistolPeteParticipant 27143]

Love your posts man. Who is in command of this EU army? And who funds it?

I knew about the Maarstricht treaty but I thought this was purely economic.

Well I don’t have the resources to buy gold/silver so I’m keeping my little pittance in Government treasury notes.

[It’sallbsParticipant]

Nope. The suspected satanist Edward heath lied to us in 1975 with the common market. You see it is all bulls~~~. They will say Britain doesn’t have a written constitution, actually we do. Technically joining the EU was an act of treason. Plus we will never leave the establishment aided by the bent media continuing the mass brainwashing of people will see to that.

http://www.leavemeansleave.eu

[BlacqueJacqueShellacqueParticipant 6890]

Excellent Yumbo. Do you ever listen to Dr. Jim Willie? Golden Jackass dot com in the public area. He shares his views on many things financial, but especially, precious metals. This is his latest interview.

Thanks for your detailed analysis.

[Y_Participant 4591]

The EU currently operates two battlegroups from member states.
The UK has so far vetoed any attempt at a bona-fide army but with Brexit it is expected that Junker is preparing a real army within the next two years. They intend member states to fund it (no surprise).

It appears that Federica Mogherini, the EU’s foreign policy chief, may be the politician in charge (but this is not clear).

http://www.telegraph.co.uk/news/2016/09/06/europe-forges-ahead-with-plans-for-eu-army/

The military plan foresees countries such as France, Germany, Italy, Spain and Poland creating permanent military structures to act on behalf of the EU and for the deployment of the EU’s battle groups and 18 national battalions.

[It’sallbsParticipant]

” I care not what puppet is place upon the throne of England to rule the empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply”.
(Nathan Rothschild)

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Egypt: Central Bank of Egypt
El Salvador: Central Reserve Bank of El Salvador
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Estonia: Bank of Estonia
Ethiopia: National Bank of Ethiopia
European Union: European Central Bank
Fiji: Reserve Bank of Fiji
Finland: Bank of Finland
France: Bank of France
Gabon: Bank of Central African States
The Gambia: Central Bank of The Gambia
Georgia: National Bank of Georgia
Germany: Deutsche Bundesbank
Ghana: Bank of Ghana
Greece: Bank of Greece
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Guyana: Bank of Guyana
Haiti: Central Bank of Haiti
Honduras: Central Bank of Honduras
Hong Kong: Hong Kong Monetary Authority
Hungary: Magyar Nemzeti Bank
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Israel: Bank of Israel
Italy: Bank of Italy
Jamaica: Bank of Jamaica
Japan: Bank of Japan
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Lesotho: Central Bank of Lesotho
Libya: Central Bank of Libya (Their most recent conquest)
Uruguay: Central Bank of Uruguay
Lithuania: Bank of Lithuania
Luxembourg: Central Bank of Luxembourg
Macao: Monetary Authority of Macao
Macedonia: National Bank of the Republic of Macedonia
Madagascar: Central Bank of Madagascar
Malawi: Reserve Bank of Malawi
Malaysia: Central Bank of Malaysia
Mali: Central Bank of West African States (BCEAO)
Malta: Central Bank of Malta
Mauritius: Bank of Mauritius
Mexico: Bank of Mexico
Moldova: National Bank of Moldova
Mongolia: Bank of Mongolia
Montenegro: Central Bank of Montenegro
Morocco: Bank of Morocco
Mozambique: Bank of Mozambique
Namibia: Bank of Namibia
Nepal: Central Bank of Nepal
Netherlands: Netherlands Bank
Netherlands Antilles: Bank of the Netherlands Antilles
New Zealand: Reserve Bank of New Zealand
Nicaragua: Central Bank of Nicaragua
Niger: Central Bank of West African States (BCEAO)
Nigeria: Central Bank of Nigeria
Norway: Central Bank of Norway
Oman: Central Bank of Oman
Pakistan: State Bank of Pakistan
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Peru: Central Reserve Bank of Peru
Philip Pines: Bangko Sentral ng Pilipinas
Poland: National Bank of Poland
Portugal: Bank of Portugal
Qatar: Qatar Central Bank
Romania: National Bank of Romania
Russia: Central Bank of Russia
Rwanda: National Bank of Rwanda
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Senegal: Central Bank of West African States (BCEAO)
Serbia: National Bank of Serbia
Seychelles: Central Bank of Seychelles
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Solomon Islands: Central Bank of Solomon Islands
South Africa: South African Reserve Bank
Spain: Bank of Spain
Sri Lanka: Central Bank of Sri Lanka
Sudan: Bank of Sudan
Surinam: Central Bank of Suriname
Swaziland: The Central Bank of Swaziland
Sweden: Sveriges Riksbank
Switzerland: Swiss National Bank
Tajikistan: National Bank of Tajikistan
Tanzania: Bank of Tanzania
Thailand: Bank of Thailand
Togo: Central Bank of West African States (BCEAO)
Tonga: National Reserve Bank of Tonga
Trinidad and Tobago: Central Bank of Trinidad and Tobago
Tunisia: Central Bank of Tunisia
Turkey: Central Bank of the Republic of Turkey
Uganda: Bank of Uganda
Ukraine: National Bank of Ukraine
United Arab Emirates: Central Bank of United Arab Emirates
United Kingdom: Bank of England
United States: Federal Reserve, Federal Reserve Bank of New York
Vanuatu: Reserve Bank of Vanuatu
Venezuela: Central Bank of Venezuela
Vietnam: The State Bank of Vietnam
Yemen: Central Bank of Yemen
Zambia: Bank of Zambia
Zimbabwe: Reserve Bank of Zimbabwe

http://www.leavemeansleave.eu

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