The Real Tragedy Of The Euro

Tyler Durden's picture

The realization that the European debacle is much more an issue of political harmonization and Empire-building than one of pure economic band-aid provision should be clear to any- and every-one who has followed the words and deeds of the various European factions for the past year or two. Yesterday, we discussed the dithering and competing camps but what is really critical is to understand how we got here and what the underlying social and political wills are among all of the players. There is no better summation of the formation, driving forces, and tensions among European leaders and central bankers than Phillip Bagus' 'Tragedy Of The Euro'. From the simple divergence of the dual visions of Europe with northern libertarians and southern socialists to the Bundesbank's fearsome reputation for showing up weak governments, Bagus offers a clear perspective on why the EMU is a 'self-destroying' and 'conflict-aggregating' system but counters that with some views on what the outcome will be and how French governmental pressure remains the cornerstone of the establishment of a European Empire for better or more likely for worse.

The Tragedy of the Euro explains why the Eurosystem almost collapsed in May 2010 when the Greek sovereign debt crisis spread to other PIIGS countries.

It explains how the system creates money out of nothing and creates perverse incentives for governments that lead to its own destruction. Without a reform, the Eurosystem is doomed for failure.

Beside the European monetary institutions, the book also describes the political interests behind the euro. The single currency was an important strategical tool in the plan of European socialists. It served to get rid of the Bundesbank and the DM that served as brakes on European inflation.

In his conclusion, Bagus points out that:

The institutional setup of the EMU has been an economic disaster. The Euro is a political project; political interests have brought the European currency forward on its grievous way and have been clashing over it as a result. And economic arguments launched to disguise the true agenda behind the Euro have failed to convince the general population of its advantages.


The Euro has succeeded in serving as a vehicle for centralization in Europe and for the French government’s goal of establishing a European Empire under its control—curbing the influence of the German state.

...and in response to what the future will bring for a system whose incentives destine it for self-destruction, he sees three possibilities: first, the system will break up; second, the Stability and Growth Pact (SGP) will be reformed and finally enforced; and third, incentives toward having higher deficits than other countries will lead to a pronounced transfer union. In the current crisis, it seems that governments are hovering between options 2 and 3 - what scenario will finally play out is anyone's guess and with Greece's March deadline looming, perhaps now is a good time to read and understand what is really at stake for the Eurozone.


The book has been generously released on pdf by The Mises Institute:


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Catullus's picture

Please share the insight.  Their marked-to-market gold has to do with what exactly?

kennard's picture

" its most important asset, its marked-to-market gold?"

The French central bank holds US$135 billion market value of gold bullion against an annual budget deficit of US$178 billion.

The Italian central bank holds roughly the same amount of gold against an annual budget deficit of US$94 billion.

The Germans have more gold, but you're not going to dip into either that or the balance of their credit capacity.

So, please explain why EU gold is relevant?

Ghordius's picture

lookma is coming from FOFOA's book - the theory states that at a certain point of inflation + gold revaluation the CB's would be "floating" again...

jomama's picture

they're just following the hyper-leveraged US model.  except with a bunch of semi-sovereign nations with their own cultures.  

assuming of course that the EU wasn't a ploy for a financial takeover of all these countries from the onset.

Zola's picture

The future of the free world rests on the US election in 2012 - may Ron Paul prevail. Iowans will hopefully usher 2012 under good auspices.

bbelux's picture

the future of the free world? Wowww! Nothing less!


Errr, where will the Alien attack then? Is Bruce Willis on duty for the new year eve or? I have not Will Smith cell phone number... Errr

JLee2027's picture

Just vote for Ron Paul, thanks

DoChenRollingBearing's picture

+ 1

Yes, please vote for Ron Paul, thanks from me as well.

youLilQuantFuker's picture

When Obama ran for president he stood for human rights, he was bright and principled, but then during the campaign certain things happened.

First of all the top financiers of the Democratic Party half of them are Jewish and almost all of those are quite Zionist and quite involved with the Israelis. At the time when Hilary Clinton and Obama were competing for support AIPAC had its annual convention. On that day Obama gave a speech and he gave more than what was expected. Lee Hamilton who was on Obama’s advisory board said to me that he went too far – he shouldn’t have said what he said about Jerusalem – we’re going to be correcting it. After the speech, behind the scenes, he was taken to meet the Board of Directors of AIPAC. Rahm Israel Emanuel, former White House Chief of Staff escorted him upstairs to the hotel room.

This is very unusual, presidency candidates don’t usually get interviewed by boards of directors like this, but AIPAC is different. The way the Israeli community signaled that they were going to support Obama, without actually announcing that they had even had a meeting with him, was to have Rahm endorse Obama. So a few hours later Rahm came out in public and did that, which was the signal to the rest of us that Obama had made his peace with this lobby and that he wasn’t going to be able to do anything they weren’t going to approve of.

SheepDog-One's picture

Anyone thinking that they would ever allow their plans for 1 world domination to be upset by Ron Paul is dreaming. He'll never make it, just watch and see.

You assume that 

A- The elections are not totaly rigged from start to finish? 

B- Even if Ron Paul WERE to be president, they'd allow him to take down the world banking system puppet masters that control it all? Ask JFK how that goes.

Never happen.

DoChenRollingBearing's picture

I hope you are wrong, but I think you are right.

mick_richfield's picture

You may say that I'm a dreamer

but I'm not the only one.

Captain Kink's picture

Didn't work out so well for JL either....  R.I.P.

Potemkin Village Idiot's picture


You lost me at "FREE WORLD" there Neil Young... (hey - but you'll always have Mary Decker to beat up on)...

WallowaMountainMan's picture

bad news from the future...

RP is RIP....i'm gonna write him in, but he ain't gonna show on the big ballot this nov....

back to the now.

bbelux's picture




the simple solution for the euro : the RESPECT of the Maastricht treaty. This should be STICKED in all the member states CONSITUTION !!!!!



mick_richfield's picture

This should be STICKED in all the member states

I think you meant to say gestucken bleiben sein gewesen.

Or something like that.

Snakeeyes's picture

Here is my bond, mortgage and housing market 2011 review. I discuss the Euro crisis.

2011: A Year In Review For Bonds And Mortgages – Treasuries Big Winner, Europe Big Loser, U.S. Housing Flat-lined

economics1996's picture


Here is a little blog I did showing how to smoke out "hopium and dopium" in Florida and our drop in unemployment from 11.9% to 10.0%. `

After you been around the block with the politicians smoking out their crap isn’t that hard.

I always try to use their government information against them.  It makes it that much sweeter.

Keep up the good work and smoke out some locals once in awhile.

earleflorida's picture

check this out economics1996:

Florida's Gov. Rick Scott's low cost health [aug/11?] care on state tab:

taxpayer-subsidized health ins. plan offered by the state-of-florida as a perk,  only available to high-ranking state officials,... which includes top management at all state-of-florida agencies --- approximately 160 state legislators are also enrolled in the program that cost $8.34/month for individual coverage, and $30/month for the entire family coverage [because good help is hard to come by nowadays] !

PS. This is the same Gov. Rick Scott that defrauded the gov't of Billion's $$$ while a former hospital chain CEO executive,... but, per usual his triumph as the newly crowned governor of florida put a wet-blanket over the past smoldering charges!


Bull_Colapse's picture

Everyone hates each other in the euro, too much history, it was never going to work but it wount stop them form trying everything they can. 

bbelux's picture

hates? in the EMU?


Well they're all politicians :-) they hate themselves during the day and sleep together at night! Every politician have the same method : throw money by the window and hope tommorrow will be better, or if shit happens, manage not to be elected at that time :-)

Iconoclast's picture

Er...anyone fancy putting up their hands to admit that they want the shared currency to survive and the united states of Europe likewise..? I'm Spartacus!

mick_richfield's picture

They're not waving.  They're drowning.

Ghordius's picture

err... here? Shared currency, yes, thanks. Does this make me Crassus?

"United States of Europe"? Why? What for? This is just another UKUS fancy...

bombimbom's picture

I am Gaius Julius Caesar and I want the USofE but unfortunately I know it will take time and many careful steps ahead. anyway I think both you and me will see it at least in its first incarnations. the name will be EU.

BTW I am happy you're not Marcus Brutus. :)

JPM Hater001's picture

Im sorry, I missed a big part of his speech...I was busy watching my toast cook.

youngandhealthy's picture

Bagus is bogus....he is a clown. Absolutely no one listen to him.

granolageek's picture

Libertian Germany? Libertarian Netherlands?


Yup, that's what passes for scholarship among Austrian economists.

TK7936's picture

Most people dont even know that the German social security system is out optable, very similiar to what Ron Paul demands on Obama care.

SheepDog-One's picture

These 'scholars' just dont get it, this is not like a jalopy theyre desperately trying hard to repair and keep on the road at all. The whole thing was PLANNED to fail so that a 1 world bank could rise from the ashes. 

Catullus's picture

I don't think that Dr. Bagus would disagree with you.

The institutional setup of the EMU has been an economic disaster. The Euro is a political project; political interests have brought the European currency forward on its grievous way and have been clashing over it as a result. And economic arguments launched to disguise the true agenda behind the Euro have failed to convince the general population of its advantages.

The Euro has succeeded in serving as a vehicle for centralization in Europe and for the French government’s goal of establishing a European Empire under its control—curbing the influence of the German state.

A vehicle for centralization in Europe sounds like a plan to establish one world bank.

Peter in wonderland's picture

I've planned many things that haven't gone according to plan. So have Europe in the past, like it's written in the history books. I guess this scholar is trying to say that we are on the same path where planning goes for one government and one currency while reality leads us to war. I don't think he was trying to repair anything, more going through the stuff that has lead us this black hole where we are.

High Plains Drifter's picture


the rothschild cartel and the european union.............


the flag, 12 golden stars  on a sea of blue.............hmmmm

esoteric meanings in judaism..



bank guy in Brussels's picture

Another thought circulated ... is that the EU blue flag with the circle of golden stars is a symbol of Christianity, or even particularly the Vatican and Roman Catholicism, taken from the usual background of traditional religious art of Mary the mother of Jesus ... typically a lot of blue, and the golden stars around Mary's head, just like on the EU flag.

Might be subconsciously borrowed from those images.

Monedas's picture

Twelve golden stars of David on a field of for each CB !  My Jews always find the action, Jackson !  Monedas 2011  Comedy Jihad Imagine Our Congress To The 12th Power....EuroZone !

devo's picture

I found this hilarious:

Dennis Gartman, the economist and editor of the Gartman Letter, said he is “about to become bullish” on gold after being neutral since mid-November.

Gartman just can't seem to make up his mind! hahah

High Plains Drifter's picture

yeh , gartman is one guy i sure would have absolutely no problem,  trusting,  to make my pile get bigger..............sarc off/

devo's picture

It's like...on any given day, if gold is up, he's bullish. If it's down, gold is a bubble and he's bearish. Soo funny.

Potemkin Village Idiot's picture

I found this hilarious:

Dennis Gartman...


You could have stopped right there & WE ALL would have had a great belly whopper to end the year...

Magnum's picture

Tragedy is that I paid US$1.65 per Euro on my last trip there.

earleflorida's picture

yeah,... well the euro sinking like a stone doesn't bode well for european vacationers -

the usa makes a huge pile of dole off these travelers now stuck in limbo - tourism equates to Big Bucks $$$ in the states,... and i mean Big Bucks!  

Georgesblog's picture

The stage is set. The conflict between force of wills and ideologies will play out, to conclusion. There will be a gloating winner, and a resentful loser.  This is a classic split in the making.

Schmuck Raker's picture

"For more equally fascinating insights visit my BLAHG."

Quinvarius's picture

The reality is, the central bankers will set the Euro exchange rate where ever they want.  At this time, the range is about 1.30 to 1.50.  Because the market is a series of interventions, the next move will be to prop it to 1.50.  It doesn't matter who defaults or blows up.  The exchange rate is set by policy, not by free markets reacting to anything.

Zero Govt's picture

"...he sees three possibilities: first.. break up; second, the.. SGP. reformed and finally enforced; and third, ....a transfer union - what scenario will finally play out is anyone's guess.."

Because Phillip Bagus is an academic (windbag) he is unable to weight an argument. All plausable options are logìcally possible (ie. he is clueless).

Mr Bagus, like all waffling academics, is only able to round-up the news/past (most of his ilk can barely do that accurately and without bias) but is unable to predict the future (ie. his output worthless)

To others that understand how the world works and are able to use experience as a guide the outcome is not a mulitple choice academic Q&A session. It is a piece of shit to predict

What is missing from Bagus' academic liberal news round-up is that even with the slackest of discpline amongst the bungling Brussels clown show the Eurocrats have still tripped all over themselves and each other like a fruitcake in a China shop. Any attempt to tighten rules amongst these dizzy indisciplined retards is going to go down like a capitalist at a Marxist rally

The other poignent point is the dye (debt) is set. The debt far outweighs anybodies financial ability to repay it. The debt also far outweighs anyones (in particular Germanys) stomach to repay it. The German Govt is between a rock and a hard place for decades of bankrolling the useless suicide socialist tossers around Europe

So that rules out completely Options 2 and 3

Leaving Option 1: break-up

If you like listening to windbagging air-headed academics, Phillip Bagus is your man. If you want to know anything of value, like a sound prediction on the future, he is clueless (like every academic and economist ever born)

Catullus's picture

An Austrian economist is now a "liberal"?

And the word is "undisciplined" not "indisciplined".

earleflorida's picture

well,... a fine howdy-doody to[o], un[in]ion