–Gold bugs, debt hawks and the EU

An alternative to popular faith

8:55 am ET 03/13/2010 – UPI: European Union ministers are nearing completion of a bail-out package for Greece. . . The package . . . could contain as much as $34 billion in aid with primary backing from France and Germany . . . Options include loans to Greece and a bond issue guaranteed by eurozone countries . . . The deal must be constructed to circumvent EU rules that prohibit a bail-out for a country on the edge of insolvency. . . “

Think of what this really says: EU rules prevent Greece from creating money. So, unlike the United States, Greece legally cannot service its debts. The EU will break its own rules to lend Greece more money, while insisting that Greece destroy money by running surpluses. (Debt creates money; destroying debt destroys money.)

Thus has the debt-growth-restricted world of the debt hawks merged with the money-growth-restricted world of the gold bugs in one currency, the euro. Each day, the euro will encounter problems with reality, problems that will require patches and rule-bending, and will devolve to a jerry-built, recession-prone, Frankenstein currency, eventually to be abandoned in the midst of crisis.

Those who have read this blog, my web site and FREE MONEY will not be surprised by Greece’s and the EU’s problems. The euro is the inevitable result of beliefs by debt-hawks and gold bugs — which are identical.

Debt hawks, gold bugs and the EU all are the same people, though they may not realize it. They all wish to restrict the growth of money, just through different mechanisms. Debt hawks would restrict money growth by outlawing its creation. Gold bugs would restrict money growth by tying it to a commodity with limited growth ability.

The EU nations are hobbled with both. They are tied to a “euro standard” (ala a gold standard) and the growth of the euro is legally restricted. Why does restricting the growth of money have such widespread appeal, when money growth so obviously is needed for a growing economy? Because even sophisticated economists do not seem to understand the three-word sentence the forms the very basis of all economics:

“Money is debt.”

Rodger Malcolm Mitchell

One thought on “–Gold bugs, debt hawks and the EU

  1. Today I would agree that “money is debt”.

    That is of course a stupid way to run an economy but it’s true – every dollar created is a debt owed to the federal reserve and the same thing happens in other countries.

    This merely demonstrates how corrupt governments have handed power to the banksters. That doesn’t mean it’s the basics of economics, it means it’s the basis of our current currency lunacy.

    That’s why it’s all going to &^%.

    As I’ve explained elsewhere, money is the means of exchange, a role usually carried by the most exchangable commodity. For thousands of years that was gold.

    There’s no logical reason money should be debt.

    Suppose I have chickens that lay eggs and you make shoes. You want some eggs but I don’t want shoes. So you make the exchange with something I DO want, such as gold, beef, whatever. Gold is the easiest:

    Long lasting
    Relatively rare
    Useful and valuable in it’s own right

    Today’s fiat currencies are not useful, except as a poor substitute for toilet paper and do indeed come loaded with debt built in.

    That’s not economics, that’s Stupid with a capital S. The S stands for ‘Scam’.

    OK, a question for you. I’ll even ask nicely, as you’re being sweet and publishing my rantings..

    Do you, or do you not, think that the US govt. should simply take over the issuing of currency themselves, rather than incurring a dollar’s debt, with interest, for each dollar produced by the (private) Federal Reserve?

    Because that’s where the debt comes from, the fact the government has private banks making it’s ‘money’.

    Some of course say that then the Fed would lose it’s “independence” from the US government, which is sillier than a silly thing in a silly hat but hey, maybe they have a point?

    What do you think?



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