Europe flounders as they attempt to grapple with Greek debt and the Euro. Problems are seldom solved by perpetuating the cause. by Gene DeNardo
(libertarian)
Wednesday, May 26, 2010
Despite what you have heard, the debt situation that is affecting Europe and concerns the financial standing of Greece is solely an economic matter. Why then does it seem to entangle itself with so many social and political issues?
The answer addresses two separate questions: why the issues seem to be also social and political and the cause of the problem in the first place. And, the entire issue gets back to the very limited amount of economic freedom we are allowed.
The current system of state backed corporate socialism has forced all of us to intertwine ourselves with each other. Believe it or not, this is not the natural state of affairs. If we were allowed our naturally endowed freedoms, we would choose who and what we would like to be associated with and no offense, but that would not include everyone!
The simple way that governments accomplish this interconnectedness is thorough forced currency. Individual governments first force currency and currency values upon their own citizens. Once this is achieved, governments bind together to force currency values upon each other and eventually we attain the state of affairs we presently have: interconnected national currencies with one dominant world currency, the dollar.
The situation is Greece is really fairly harmless. This is not to say that many people in Greece won't suffer because of it. But, taken in a context of true economic freedom, a situation like Greece would have little effect outside its small sphere of influence.
If we were all individually free to choose currencies and monetary values of our own, what the Greek government did or what even the entire Greek population did would have little effect on the rest of us. In fact, what Americans did would also have little effect. They would simply owe whoever they owed and those that were pesky enough would get paid. Those that wouldn't would learn a tough lesson.
The actions of the Greeks and their creditors would have an extremely negligible effect on the value of any currency or medium of exchange in the context of a free economy. In other words, the risk of force currency would NOT be socialized, if we were free to choose economically. Those directly connected to the debts and credits of the Greeks would be directly affected, the rest of us would hardly notice.
The story is much different though, with our system of forced interconnected currencies. Governments are able to take on debts far greater than their capabilities simply due to the value of the currency they are forcing the population to use. In a sense, the labor of every Greek citizen is leveraged to extend its governments debt, just like our labor is here in America.
Combine that with the forced acceptance of the Euro [forced upon the citizens] in less developed European countries. By accepting the currency of economically stronger and more developed countries, the value of the labor of citizens in relatively less developed countries is cheapened. Greeks find they have to spend more to get less and therefore need to borrow more from these same richer countries. It is a cycle that eventually gets us to exactly where we are: Greece and other countries like Greece can no longer pay their bills.
The elites that steer the course for the Euro could care less about Greece and its fine people. They only care about the value of their particular brand of forced currency, the Euro. If Greece goes down, the Euro will fall sharply and all those wards of the Euro, financial conglomerates that depend on the false value, will receive a bit hit. The vibrations will be felt throughout Europe and the world not because of the magnitude of Greek indebtedness, but because the false inflated values of all currencies are interdependent upon each other. If one of the intertwined currencies loses value, all currencies and faith in those currencies is affected. It is the proverbial house of cards.
This, of course, could never occur if we were allowed the freedom to value currencies and create currencies at will. In that case, our individual choice of currency would link us with everyone else that chose to use that particular form of money. But, it would also separate us from everyone else who did not choose that form. We would have true freedom of association.
This would pose great limitations to governments. No longer would unlimited state debt be a possibility. In order for state debt to occur, the population would have to choose the state minted currency. If people thought the local government was a little too sloppy on the financial end, they could simply choose an alternative currency. In fact, governments could dissolve simply at the whim of the citizens choosing an alternative currency, rather than the state currency.
This would be true of all financial entities. If the population thought AIG or Citibank was not proceeding along a course it approved of, they would simply avoid their currency and choose another. AIG would never need a bailout simply because they could never achieve that "too big to fail" size without proven performance, which they have a real problem attaining. And if they did somehow reach their present bloated size and then it was found they were actually built on a foundation of sand, only those who choose to use their currency and falsely believed in their product would be affected. Nothing in creation would be "too big to fail".
In fact, "too big to fail" is always referring to forced currency. It is the forced currency that is too big to fail, not the particular firms. The firms in question are always beneficiaries of the currency but like Greece it is not their well being that is of greatest concern but that of the overvalued currency.
And, all forced monopoly currencies are inherently overvalued. Simply because we have no choice in the matter.
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The views expressed
in this article are those of Gene DeNardo only and
do not represent the views of Nolan Chart, LLC or its affiliates.
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