6 responses to “The Euro could work so why doesn’t it?

  1. An absolutely excellent expose Peter! In it you hint at the solution – viz. ” there does not have to be any bonds involved; it just needs money to be lent back” – to the underlying “elephant in the room” that you conveniently?/[un]intentionally? ignore; namely the accepted creation of essential money as debt to themselves by commercial banks. Any successful expanding economy, as many have been over the past half century, requires an APPROPRIATE expanding money supply – the oil that allows economies to function and the fuel that drives them forward! Obviously too much causes inflation just as too little results in recession, deflation and on-going depression. But more significantly supplying this necessary new money as debt – either directly into the economy as loans by banks or indirectly through government bonds – is fuelling a disaster time-bomb. Any debt-based financial/monetary system will eventually stagnate; either through the increasing debt load extrapolating exponentially or simply through fear of the burgeoning problems. We don’t have to abolish the creation of all money as debt by commercial banks; we merely need to control it by hiking up capital reserve requirements so that they can no longer foster “Boom and Bust” as they are programmed to do!
    It would also prevent all future banking meltdowns – the insolvent would simply wither away.
    At the same appropriate expansion in the real debt-free money supply should have been allowed by a measured mix of
    [1] Infrastructure capital expenditure – hospitals, schools, roads, railways even aircraft carriers! [No stupid PFI economic scams!]
    [2] Lower taxation as there would have been no need to put aside up to £100bn p.a. funding state borrowing nor to fund the afore-mentioned capital expenditure.
    All of this is very simple but getting from where we are now to where we need to be is not! The vested interests involved in the banking and financial sectors will have to be dragged kicking and screaming if it is not even already too late to do anything. On top of that, even if the will is there, how do we replace all the debt in the system without the funds cascading into asset bubbles and/or inflation. Compulsory direction/focus of the remunerating money will be essential through some form of sovereign wealth control but that starts to smack of communism!
    More suggestions here….!

  2. This is excellent! Would you mind if I translated this into Italian and reposted it?

  3. Poland is not in euuro zone. poland has its own currency.

    • Yes you’re right. I shouldn’t have included Poland in my list of Euro countries. That was a slip on my part.
      However, we need to ask why the Polish economy is in such poor shape with high levels of unemployment and underemployment.

      The answer, I would suggest is that although, as you say it uses the Zloty , the currency is not free to float. It is pegged to the Euro and has not shifted much from a fixed rate of Euro0.24 = 1 zloty in recent years. The Polish government have committed to following the same rules as the Eurozone countries and are therefore experiencing the same problems.

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