The Problems with the Euro

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The Problems with the Euro

An Analysis from a Monetary and German Perspective


Sabine Kurjo McNeill
Organiser, Forum for Stable Currencies

for publication by the Monday Club, Chairman: Lord Sudeley FSA

The Global Picture: Euro vs Dollar and Oil

Lord Sudeley has identified ‘usury’, the principle of taking interest for lending money, as the root of all monetary evil.  He has been sponsoring meetings of the Forum for Stable Currencies at the House of Lords since 1999. 

The usury principle has been institutionalised as a mechanism of lending money not only to corporations and individuals, but also to governments. As a consequence, interest-bearing ‘bank money’ is virtually the only money in circulation, whereas interest-free ‘government money’ also called cash or M0, is less than 3% of the total money supply.  In comparison, cash used to represent nearly 30% of the money supply in the late sixties.

Interest-bearing money compounds interest on interest at a rate of growth that is exponential by nature.  This exponential growth is inherent in any currency that is issued by any authority as a fiat debt based currency: the money that is created out of nothing - through ‘fiat’ as God created light through ‘fiat lux’.

I have not seen a graph that would illustrate the amount of dollars in circulation compared with the amount of Euros and Sterling. Many people consider the value determined by the exchange rate more important than the amount of money in circulation.  After all, most people need to think short term to ‘make money’.  But financial institutions have been around for a long time and benefit from the long term effects of compounding interest on interest.

In the House of Lords’ tradition of long-term thinking, however, it is more relevant to compare money supplies than exchange rates, for the money supply equals the amount of money available for any economic activity, whether in the public, private or not-for-profit sector.

Oil is not only a globally vital commodity, but virtually another currency.  It so happens that Saddam Hussein had begun to trade oil for Euros, and many respected analysts conclude that the war against Iraq was about the hegemony of the dollar and control through the institutionalisation of usury in a country where ‘Riba’, the Arabic word for usury, is a deadly sin.

If oil became priced in Euros then the Euro might match the dollar on a global scale in terms of money supply.  The implications in terms of US trade; American debts and foreign investment in the dollar could be felt negatively in the US but positively in the European Union.  For there would be more and more Euros to transact and invest with than dollars.


The European Picture: Euro vs Mark, Franc et al

Twelve countries have so far adopted the Euro and thus live in Euroland or a Eurozone which should be considered quite differently than the European Union.  Brussels houses an organisation of civil servants as well as an European Parliament, but the money supply is regulated by the network of banks who operate anywhere in the world. For banks create money with every loan they offer, be it in Euro or any other currency.

The preparation for introducing notes and coins to all banks by January 1, 2002 was a military operation of major proportions. I happened to have seen a report about it – but nobody mentioned who paid for this.  What a waste of paper and metal to shred everything that was DM, Franc, Lira, pesos, etc. The costs for new cash machines and pricing devices had to be born by every little shop and every big company.

One could wonder why the introduction of the Euro in Germany had such bad effects in terms of increasing unemployment, rising prices, insolvencies and a general stagnation of the economy.

But monetary reformers had predicted this development: for the money supply governs the economy of a region or nation state, whereas the elimination of exchange rates with the introduction the Euro also produced a centralised ‘one size fits all’ interest rate policy.

Brussels now attempts to control the money supply in Germany by curtailing the expenditure of the German government through ceilings for the National Debt and Deficit.  But governmental expenditure is only one source of money supply. 

When Euros replaced DMarks in people’s pockets, at the exchange rate of nearly 1 : 2, prices were generally not halved.  Instead, the prices that people were used to in DM became eventually almost the same in Euros while salaries and pensions were strictly halved.

Thus the constantly growing inflation that is built into the exponential growth of compounding interest made a quantum leap in terms of loss of value.

No fiat currency whose supply is generated in an almost uncontrolled fashion by banks, and whose value is determined by supply and demand at foreign exchanges, can provide short term and long term value and thus stability.

Furthermore, every fiat currency is subject to varying interest rates - supposedly to regulate the money supply.  However, the combination of

¨      Setting interest rates by Central Banks

¨      Changing exchange rates through money markets

¨      and not controlling lending through private banks

creates the illusion of national control and the reality of instability - through inflation caused by compound interest.


The British Challenge: Euro and Sterling

The Euro is always advocated as an alternative to Sterling whereas it is perfectly possible for banks to set up Euro accounts and for shops to take in Euro notes and coins in addition to Sterling or for that matter any other currency.  Credit cards don’t care which currency you’re dealing in and the Ecu educated Europeans into thinking ‘dual currency’.

A Europe of the Regions is being promoted at a time of globalisation; the great British challenge is to think parallel rather than either/or: to let more and more people get used to transacting with Euros but not to impose it as a single currency.  A common currency would at least maintain the illusion of national sovereignty even though the real control lies in the hands of bankers anyway.  However, bankers need ‘security’ to give loans, whereas National Debts are ‘secured’ on national governments’ ability to tax.

The European Union Debt is ‘secured’ on twelve national governments but the beneficiaries are those individuals or institutions whose income is the interest on this debt.

Money means control. Whether as loans with interest or as money supply through creation.  George Monbiot’s book “Captive State” illustrates best how corporations are determining what happens in Britain and how governments are only used to further the goals of corporations.

The real question is what takes place when these corporations are banks that create and manage our money – no matter whether Euro or Sterling…

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