The Euro Disaster: Failed Monetary Unions, Past & Present

Via GEFIRA,

A glance at history

The beginnings of monetary union can be traced back to attempts to unify the coin standard. Emperor Augustus successfully unified the coins in the Roman Empire – for over 400 years the gold coins were minted almost exclusively with the seal of the Roman Emperor.

 

https://www.zerohedge.com/sites/default/files/inline-images/20180117_eur.png

The fall of the Roman Empire, caused among other things by its multiculturalism and multinationality, led to the disintegration of the state and to the deterioration of the coin value through a lower proportion of gold or silver.

Until the 19th century, the fragmentation of the right to mint coins to the regional rulers led to the fact that the profit resulting from the creation of money from the difference between metal value and production costs and the value of the coins issued was no longer allocated only to a feudal ruler. In the 19th century, completely new methods of creating money emerged for the ruling classes – paper standards were gradually introduced. The paper standard should no longer be based on gold or silver parity, but should be secured by appropriate policy of the central bank, especially by influencing interest rates.

In the 19th century, monetary unions were developed, on which the idea of the euro was based. All failed.

In 1865, the Latin Monetary Union unified the currencies of France, Italy, Belgium, Greece and Switzerland. A French franc corresponded to an Italian lira, which corresponded to a Belgian franc, etc. Greece and Italy were then as now debtor countries. The Union’s objectives were similar to those of the euro zone today: to simplify trade and make countries more competitive on world markets. Although the value of the coins in the Latin Union was based on a fixed gold or silver standard, paper money were not based on the precious metal parity, so that the member states’ central banks were able to print as much as they wanted. Coins minted in accordance with regulations were allowed to circulate freely throughout the Union. Since the relatively stable ratio of silver to gold gradually changed in the nineteenth century to the disadvantage of silver, silver coins flowed in from the south to settle the debts of the southern European states. The obligation to redeem the silver coins in gold at the official parity led to considerable losses in the “North”.

In 1893 Greece became insolvent and, just as it is today, a two-speed Europe emerged of the prosperous states in the north and the debtor states in the south. The French and Belgians financed Greeks and Italians because they were afraid that otherwise all coins would have to be withdrawn from circulation. As it is today, a non-working Union existed until the First World War. What must happen to make us put an end to the madness of the euro?

The same happened with the Scandinavian Coin Union of 1872: the different pace of economic development in Denmark, Sweden and Norway led to the flow of gold to Sweden. The Union also ended with the outbreak of the First World War when the obligation to convert the money into gold was lifted.

A glance at the present

The cost of saving the banks during the last financial crisis was borne by the citizens. Later, politicians led by Merkel saved Greece hand in hand with international bankers. Also at the expense of citizens of other EU countries. What was the point? Despite the Troika measures, Greece is actually bankrupt. Its debts are now higher than they were before the “debt reduction” imposed by the Troika, because the country does not have its own currency, which it could devalue and thus cope with its debts.

The huge sums of money pumped to Greece did not create any new jobs, no consumption and therefore no new tax revenue.

The ECB decides on interest rates in the euro area and they have remained low for years. In Germany, low interest rates led to a revival of the real estate market, some people are already talking about a real estate bubble, prices of apartments and houses are rising, while savings – whether on bank accounts or in the form of investments – are falling, as they earn a de facto negative interest due to the rising inflation. A gloomy future for future pensioners, if such interest rates persist for longer. Whether the introduction of the euro was favourable for German citizens remains therefore questionable. It stimulated the German economy, that’s right.

However, the introduction of the euro also made southern European economies less competitive.

“With its introduction, the Southern Europeans have recognised the increase in their purchasing power, which could take place due to the fact that the euro is worth more than their national currency; the perception of a better purchasing power created by the euro has led the Southern Europeans to increase imports, but also to raise the prices of their goods (…) The economies of France and Italy were both net exporters before the introduction of the euro and became net importers, whereas Spain, Portugal and Greece have increased the size of their trade deficits”.

Slovakia was the only country in the Visegrád Group to introduce the euro. The consequences?

Eight years after the introduction of the euro, food prices in Slovakia are ten percent higher than in Czechia or Hungary. Compared to Poland, they are even one-third higher. Although wages in Slovakia would have come closer to the Czech average by 2014, they are now far from each other again.

The purchasing power of the Slovaks, due to their lower wages and higher prices, is significantly lower than that of the Czechs.

In summary, we have a monetary union without a common fiscal, tax, social and defence policy that has failed and continues to fail: Greece’s bankruptcy, Brexit, Catalonia, high unemployment in Italy, Spain and Slovakia, to name but a few disasters.

Neither does political union exist; it is an idée fixe, a mirage of sick minds of Brussels bureaucrats who do not learn from the history of monetary union and ignore facts.

Comments

gdpetti 07564111 Thu, 01/18/2018 - 11:48 Permalink

Yes, but not the old Common Market, which those thinking of leaving should set back up... but those in the City of London are OWO, looking to remain in the global conquest game, and behind the curtain still are... what we see is in front of the curtain here in Oz... not behind... so we see only the puppets... and they are expendable... as the current endgame scenario is 'out' with the OWO, in with the NWO, which doesn't need the markets or BS like 'bailout' for Greece, as that lie isn't new, England, USA, etc do it repeatedly... we blame the poor countries as we exploit them... Germany is bailing out their own banks.. like Bundesbank... for all those bad loans that went into private hands, as very little of such policies ever go to Main Street. Same everywhere are banking policies and imperial policies are played.

In reply to by 07564111

BritBob Thu, 01/18/2018 - 05:11 Permalink

The Crazy EU- Gibraltar

MEPs and legal experts have claimed the veto over the territory’s future after Brexit would give Spain special status among EU nation, when they should be on an equal level.

The EU’s Brexit negotiating guidelines stated that the Brexit deal will not apply to Gibraltar without an “agreement between the kingdom of Spain and the UK”.

Experts have told the Telegraph that the veto could be illegal under EU law.

Spain's Gibraltar claim has NO legitimacy and YES would be illegal.

They've effectively signed the territory away 3x times!

Gibraltar – Spanish Myths and Agreements (single page):

https://www.academia.edu/34608739/Gibraltar_Spanish_Myths_and_Agreements

 

EuroPox Thu, 01/18/2018 - 05:11 Permalink

The problems of the Euro are symptoms of the disease, not the cause.  The disease is the EU with its leftist, meddling, interfering mentality.  Countries/people prosper when taxes are low and government is minimal - socialism does not permit either.

Uncoy EuroPox Thu, 01/18/2018 - 06:33 Permalink

We were doing just fine with great medical and educational systems until our countries were drawn into central government à la americaine with the clowns in Brussels robbing us blind while in bed with corporate lobbyists.

Socialism is just fine. American style capitalism results in rotting infrastructure, corporate cronyism, corruption and a slowly decaying population (poor health and poor education).

In reply to by EuroPox

nmewn Uncoy Thu, 01/18/2018 - 06:59 Permalink

"Socialism is just fine."

lol...as long as one is a member of the royal family I guess sure, but disregard the crash of the national-socialist Carillion corporation (infrastructure/cronyism/corruption you say?) and those folks over there on gurneys awaiting their "healthcare choices" in the hospital hallways (poor health and education you say?) as they are in fact, just the worthless eaters.

At your own peril, mate ;-)

In reply to by Uncoy

dumluk EuroPox Thu, 01/18/2018 - 09:35 Permalink

Socialism appears to have worked fine in Uruguay for one, and Ecuador as well, at least for the first two term of Correa before he went off the rails.......I dont think that a certain fine tuned measure of socialism is a problem, especially in third world and developing little countries where 6 families tend to control 95% of the wealth and the land.........Whether its run amok mercenary capitalism or stifling overdose of socialism, both these systems have their limitations and inherent weaknesses.......Have not most countries in Western Europe been socialized for a long time? Where is the highest standard of living and the lowest rates of crime? In Western Europe or Crony Capitalist U.S.A.? Whose running surpluses and whose running deficits?

In reply to by EuroPox

Killdo EuroPox Thu, 01/18/2018 - 11:09 Permalink

it worked fine in Yugoslavia where I grew up  until Uncle Satan created an artificial war to destroy the country. 

We had good and free schools and universities (no brainwashing kids about imaginary masters / glorified slavery etc); free healthcare for everyone; every company had a pool of good quality apartments they gave to their workers for free; we did not have no-go areas like in San Francisco, LA etc and people were much happier than Americans, Brits and Canadians. They still are

In reply to by EuroPox

inhibi EuroPox Thu, 01/18/2018 - 13:15 Permalink

Socialism is wayyyy to broad a term. It does work. Czechia is a fantastic country, its 1000x better run than the US. They have some of the highest percentage of small businesses. Every time I go back to visit, the country feels more vibrant.

Instead of labeling, you should look at the facts. In the US, depending on what state you are in, you could be paying taxes just around that of a "socialist" country. The US gov is meddling in EVERYTHING these days, and yet, you still end up paying. For example, you claim socialism is stiffling. Really? The Czechs get free daycare, less work hours/more vacation, free healthcare (and I do mean free), free education, free transportation, etc. They pay maybe 15% in income tax, with a 7% surcharge if you make a ton of money. So tell me, how does that compare to the US where you pay 35%, get nothing free, education is $250k, you pay for daycare ($1000s/month), you get no vacation, and you work like a dog until you are 60? 

Please, do some fucking research into the actualities of living in a socialist country rather than simply using "socialism" to equate to "communism", which it fuckin aint. 

In reply to by EuroPox

ukipboy Thu, 01/18/2018 - 06:15 Permalink

The Euro is doomed to failure. Reference Martin Armstrong who is alleged to have told the EU that the common currency was bound to fail unless they introduced a common Eurozone bond to finance the deficits. Now the imbalances have grown too large. It is not just Greece that is bankrupt. 114 Italian banks are legally insolvent and the Italian Target 2 imbalances have hit a record high of 432 billion euros according to Reuters. That is the sum of money owed by Italy mainly to Germany. On March 4th, Italy goes to the polls and it looks like either the Eurosceptic 5-Star or Berlusconi will win power. Expect things to get interesting after that date.

peterk Thu, 01/18/2018 - 06:50 Permalink

who said  there is a problem with the EURO?

There is no problem, as  the euro is money and thats only a medium of exchange.

The Problem is the ECB... just like the FED  and all the other central banks.

There pumping their currencies and causing bubbles that are misallocating economic resources.

When you have a small  currency as all countries had before individually, the CB cannot PUMP the currency and cause bubbles as it leads to inflation and soon it bursts. So a minor currency  restricts how much the CB can screw the population, as their bubbles are minor. When you  have a  big trade currency like the euro/us etc you can  make big bubbles  which dont easily pop, so the CB can continue its monetary experiments for long periods.

So there is no problem with the euro, its just  Central bankers's playing games thats the problem and those games/bubble are more enjoyable to them and there wealth asset rich freinds in large  trade currencies like the euro.

Small currencies keep a nations finances honest.

 

whatisthat Thu, 01/18/2018 - 06:56 Permalink

I would observe a scam or Ponzi scheme -such as the EU certainly is, will likely end badly.  Kudos to Britain for moving away from EU unrealistic commitments before the crash...

Let it Go Thu, 01/18/2018 - 07:00 Permalink

Time may be running out for the Euro-zone, is it time to throw in the towel? For years this poorly constructed union has been criticized for being unable to resolve difficult issues but rather kicking the can down the road, postponing and delay have become the standard operation procedure for which they are known.

Euro-zone banks are neither "fixed" or the system healthy. The Greek economy remains an issue. Italy is deeply in debt, unemployment is high in many countries especially among the youth, and refugees continue to flood in adding more stress to an overburdened social system. Now the people of both France and Germany are indicating they may of had enough. The article below delves into these problems.

 http://brucewilds.blogspot.com/2017/02/euro-zone-woes-continue-enshrouded-by.html

 

Batman11 Thu, 01/18/2018 - 07:22 Permalink

In the neoliberal era the world lapsed into a whole set of false beliefs and debt was the answer to every problem. Neoliberalism’s neoclassical economics didn’t consider debt allowing debt to seem like the answer to every problem, though it wasn’t true.

William White (BIS, OECD) looks at this and other false beliefs that dominated in this era.

https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s

The UK hasn’t had a sustainable economic model since 1980.

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.53.09.png

The economy has been running on debt and its successful phase relied on adding more and more debt. The UK economy was set up to fail over the longer term due to the build up of debt and in 2008 we reach the Minsky Moment.

The “black swan” of 2008?

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

Debt again, just like 1929.

Adair Turner has looked at the situation prior to the crisis where advanced economies were growing by 4 - 5%, but the debt was rising at 10 – 15%.

This always was an unsustainable growth model; it had no long term future.

https://www.youtube.com/watch?v=LCX3qPq0JDA

The Euro-zone needed fiscal transfers to make it work.

What do they do?

They let the rich North lend to the poor South as they have fallen for the false beliefs of neoliberalism. This works like fiscal transfers to start with, but the flow of funds will eventually reverse as the money needs to be paid back plus the interest.

The Euro-zone appeared to work but was set up to fail in the longer term as it had used debt rather than fiscal transfers.

Mark Blythe examines the data.

https://www.youtube.com/watch?v=B6vV8_uQmxs&feature=em-subs_digest-vrecs

Neoliberalism, it’s all been a bit of a disaster.

katagorikal Batman11 Thu, 01/18/2018 - 15:58 Permalink

Neoliberalism is almost always used as a term of abuse which obscures its origins. Opponents throw the term around quite loosely, usually encompassing all the things of which they disapprove (they are the kind of people who flaunt their superior disapproval to benefit mankind).

To the extent that neoliberalism is founded on the Austrian and Chicago schools, neither of those would advocate large bloated govt funded by ever growing debts. In fact just the opposite, as they both favor smaller govt, lower debts and fiscal responsibility. Both schools support free choice for individual debt, but only at market interest rates, not artificially low rates imposed by central banks to encourage vacuous here-today-gone-tomorrow consumption. The Austrian analysis of the boom-and-bust business cycle lays much of the blame with credit-fueled expansion. 

You are fighting a strawman invented in your own confused imagination, by repeatedly cross posting slight variations of the same turgid off-topic rants to multiple news sites under different aliases.

In reply to by Batman11

Dr. Bonzo Thu, 01/18/2018 - 07:49 Permalink

The fall of the Roman Empire, caused among other things by its multiculturalism....

 

*Sigh...* I must be grumpy today. Multiculturalism... in Rome. At the end of the Roman Empire. Multiculturalism. Is the whole fucking world just out to lunch? It must be me then. "Multiculturalism" is a contrivance of the left. You're going to apply contrived confabulated contemporary political theorems sculpted to dislodge contemporary society and then apply it to your essay about the Roman Empire and launch your essay in poorly worded gibberish.

Didn't read a fucking word of it. Stopped at multiculturalism. You girls need a fucking editor. Stat. A grown-up. Someone with the education of a competent 12th grader.

Caused by it's multiculturalism. SMFH... illiteracy squared.

The Alarmist Dr. Bonzo Thu, 01/18/2018 - 08:09 Permalink

The Germanic Tribes were to Rome as Mexicans et al are to the USA: Cheap labour that would do the work that Romans wouldn't do, including serving in the military.  And as Rome and other imperial cities of the Western parts of the Empire devolved into multi-ethnic hellholes, the Greco-influenced elites decamped to the more Greco Byzantium to keep the ruse going another millenium.

Lather, rinse, repeat.

 

The question is, were the Greeks of Rome the equvalent to another group running our show today?  Another is, how have the Greeks been so able to screw the rest of Europe so long and so often, and in the deal make it look like they are the victims?

 

 

In reply to by Dr. Bonzo

Aeonios Thu, 01/18/2018 - 08:05 Permalink

Its debts are now higher than they were before the “debt reduction” imposed by the Troika, because the country does not have its own currency, which it could devalue and thus cope with its debts.

LOL. Right. Greece is worse off because it doesn't have a print button that would allow it to become Venezuela or Zimbabwe instead of exercising fiscal responsibility. I guess in a way that's not technically wrong, but..

honest injun Thu, 01/18/2018 - 09:52 Permalink

The chart shows that in 2016 each Greek owes 31,490 euros.  This is lower than the on-budget debts in the United States.  When Social Security, Medicaid, and all the off-budget liabilities are added, each American is much worse off.  Yet there is no panic.  If you take all the debts, including mortgage, student loans, credit cards and divide by the number of taxpayers it is more than $1.5 million.

Sandmann Thu, 01/18/2018 - 11:42 Permalink

So how would the US Dollar Union function without Federal Defence Pork Barrel and Transfer Payments to compensate for economic degeneracy ?