|We witness nowadays, in real time, the collapse of the monetary system with one unique currency in Europe. But as soon as one suggests, for practical as well as theoretical reasons, the use of domestic currencies for domestic expenditures, supporters of the unique currency start to yell. "It's irresponsible, it is the destruction of Europe, it's a terrible step backward." The most exalted mention Munich, Little Big Horn, Waterloo. But what's the matter?
The matter is to cease issuing vast quantities of bonds in France, which we sell to the Germans in exchange for euros (because they have plenty of them because of our trade deficit with them) to pay our civil servants.
Of course it would be better if the civil servants had earned these euros exporting, but I am getting astray civil servants don't export, they serve.
Instead then either we would directly pay government expenditures with these bonds, as California did. We would have the option of forcing banks to accept and convert them, or even to give them legal tender status. Or we would issue new pieces of paper paying no interest called bank notes, making the proper records in the balance sheet of the Banque de France in the assets and liabilities sides (I won't go into a bank accounting course), with legal tender status, bearing the sign and name of our choice. I propose eurofranc so as not to suggest too much of a step back. Furthermore eurofranc has a welcome techno-monetary sound fitting the present day, and is euphonic.
These bonds would soon see their yield increase, that is their value decrease. Bank notes in national currency too. But even the current bonds sold abroad will lose value. The Italian ones already have their yield exploding, and the price of CDS to guarantee them is taking off.
At any rate the present solution consisting in selling these bonds to the Germans or that of issuing a new domestic currency are not like day and night. They are very similar ways to proceed. In both cases, they come and try to solve a regrettable situation caused by thirty years of carelessness from the executive power. The 2000 billion euros worth of bonds issued by the French governement to pay current expenditures it's already the printing press. We are not proposing a new, radical solution corresponding to "a terrible step backward".
Furthermore, I've shown many times that a unique currency in a group of different countries is a monetary aberration, even when there is no crisis. They must each have their own domestic currency or currencies on top of the common one.
The euro will remain a currency useful for inter-country trade, just like in a group of persons a money, that is a unique type of debt instrument as opposed to a collection of n(n-1)/2 types is useful and according to certain criteria optimal.
Finally, one may wonder how come millions of people were mislead for decades by the unique currency. Actually it is a common situation in history, because monetary phenomena are difficult to understand. Generally speaking the metaphores used in the medias or in conversations in a bar to talk about money are bad because they fail to capture the double character of movements of value. For instance "capital flight" is usually badly understood by people, who figure out funds which were at work in one country and which are leaving. Another example of durable monetary mistake: from Croesus (middle of the VIth century bc) until the beginning of the gold standard (circa 1870) everybody thought that bimetallism was a good system, even though it created loads of problems and made possible (when seigniorage was not too strong) automatic money making machines.
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