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Saving The Euro In Four Easy, Unaccountable Steps
Reflections
Reflections
With four simple actions, the Euro can be temporarily saved. There’s not even a political decision involved; all of these four actions can be taken by the executive European branch and its agencies without involving accountable politicians.
At the introduction of the Euro, The United States protested loudly at the existence at a 500-euro bill, as it facilitated the transfer of large amounts of cash in physical form for illicit activities. At this level, however, the concern is not the illicit activities as such, but the economic dominance that the use of currency brings. For the infamous “ordinary people”, the law certainly matters, but at this level, what’s legal or illegal trade can be changed at the stroke of a pen – so what really matters is the neverending game of geopolitical dominance.
So most notably, the 500-euro bill meant that a briefcase packed with euros could transfer a lot more value than a briefcase packed with dollars (the 100-dollar bill).
Because of this, the 500-euro bill meant a threat to displace the US Dollar as the currency of choice for the world’s two largest markets – guns and drugs. (Oil is third.) This didn’t happen, but if it did, it would be a serious prop-up to the weak Euro at the cost of the preciously-failing US Dollar. It would not be a rescue package for underlying structural problems, but it would be a reprieve and breathing space to fix those real problems.
So, four things:
1. Issue a 1,000-euro note.
Issuing a 1,000-euro bill means that a briefcase maxed out with euros becomes worth about 15x as much as a briefcase maxed out with US Dollars.
If the 500-euro note didn’t have the effect of displacing the US Dollar on the illicit markets, which the US feared (and protested against), then maybe the 1,000-euro note will. But we’re not done yet:
2. Issue a 2,000-euro note.
The euro is built on having 1, 2, and 5 in every order of magnitude. So in order to be consistent with the euro notes and coins as such, we’d also have to issue a 2,000-euro note. As a side effect, of course, the proposition becomes twice as valuable.
You can see where this is going as we start looking at the third step of the four:
3. Issue a 5,000-euro note.
So the final new note, obviously, would be the 5,000-euro note.
It is very important to note that issuing these new notes would not mean printing more amounts of money as such, like many countries have mistakenly done when they are debt-stricken. It would merely enable more compact transfers of value, more physically compact transfers of value, when this currency is used.
More specifically, it provides a 50x value proposition over the US Dollar in the world’s two largest markets that make up about 10% of the world’s trade, or about seven trillion euros yearly.
4. Continue ignoring the stability pact.
The eurozone has a budget deficit limit known as the stability pact, which says that no country may have a budget deficit above 3% or a debt above 60% of GDP. (In comparison, the USA has a yearly deficit running at about 50%.)
For the prospect of having an external party buy seven trillion of your currency, you need a deficit of a similar size that they can absorb by buying your currency. The stability pact just won’t allow this (and it is one of the major hurdles to the euro replacing the USD as the world’s reserve currency). While issuing new notes as such doesn’t mean creating such a deficit, enabling other people to buy your currency means that you must have currency for sale.
However, with most member states being in flagrant violation of the stability pact already, this should not be too much of an administrative problem. It is already widely ignored.
It could be noted that in order to survive an economic meltdown, you need to make sure you’re not the weakest economy. It’s kind of like being a zebra in a herd running from lions: you don’t need to be the fastest zebra, or even an average zebra – you just need to not be the very slowest one.
Enabling illicit markets to buy seven trillion worth of euros to displace the USD in order to make their financial transactions 50x more cost-efficient would, obviously, also put an equivalent seven trillion USD for sale on the currency markets. This is something that even China has religiously avoided (it prefers trading its USD for factories and mines abroad, rather than selling it on the market, to get rid of toxic USD assets). The results could be… interesting, seeing that the USA is already dependent on finding debt buyers for 1.5 trillion of USD deficit per year. If that doesn’t happen, the federal administration can’t pay its bills.
As a final note, it should be noted that I’m not advocating this solution. I am pointing it out as something that can be done – in terms of a possible chess move on the geopolitical chess board, if you like. The solution I would prefer to advocate would be much more far-reaching and would involve nasties such as transparency and accountability for authorities and politicians, though if these had been properly applied, we would not have had the euro in the first place.
But above all, many people seem to think that the same rules apply to the economic leaders as to everybody else. This article is an example of the thinking that happens in the geopolitical game; it is a completely different set of rules.
To be honest, though, just issuing new bills and continuing to ignore the stability pact is probably better than setting up several metric fucktons of currency emergency funds to save capsized economies – in about the same way it is better than beating yourself over the head with the nearest hammer.
About The Author: Rick Falkvinge
Rick is the founder of the first Pirate Party and is a political evangelist, traveling around Europe and the world to talk and write about ideas of a sensible information policy. He has a tech entrepreneur background and loves whisky.
Do you have any suorce backing up the claim that guns and drugs are the world’s two largest markets? I often see people caliming that this or that is the world’s first, second or third largest markets, but these claims always fail to fit in with what I see people use their money for. Food and housing should be rather large markets, for instance. Not that many spend more on guns than on their mortgage.
Old data, I’m afraid, I don’t have any recent fresh data. Regardless, their order of magnitude should be similar enough still. (Besides, there is always an obvious problem with officially measuring the size of illicit markets.)
Hopefully, the swarm will find data to dispute or confirm this within the next hour or so.
Hm, I’m not an economist… but a short googling shows that global real estate market at the end of 2006 was about $10 trillion (http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&ved=0CD0QFjAD&url=http%3A%2F%2Fwww.rreef.com%2Fcontent%2F_media%2FResearch_The_Future_Size_of_The_Global_Real_Estate_Market_July_2007.pdf&ei=olJkUMfCFMbT4QT4iIGIDw&usg=AFQjCNGyQFYN97leaRFQcDZMkeaPI7hWkQ Chart 4 – if I understand it correctly :-/ ), although from this chart http://tampamoves.com/wp-content/uploads/2011/12/Housing_Comparison_Asset_Class1.pdf it looks like at least for US it’s been receding since than (to about 60%).
While the world defense budget in 2011 (http://en.wikipedia.org/wiki/Arms_industry) looks like about $2.3 trillion, US arms sales in 2011 were only like $66 billion (http://www.nytimes.com/2012/08/27/world/middleeast/us-foreign-arms-sales-reach-66-3-billion-in-2011.html), with the worlds arms market around $85 billion, which is paling even compared to the global drug trade around 2011 (http://www.mirror.co.uk/news/uk-news/illegal-drugs-trade-now-worth-119092) estimated at around $300 billion (close to value from 2003? http://www.boston.com/news/world/europe/articles/2005/06/30/un_report_puts_worlds_illicit_drug_trade_at_estimated_321b/).
I haven’t even looked at the food market :-) but it looks like the guns and drug trades have a very long way to go to the first 2 places… or to the above mentioned 7 trillion euros… ;-)
” these claims always fail to fit in with what I see people use their money for. Food and housing should be rather large markets, for instance. ”
Well, yes. But sadly, a bit of googling seems to show depressing evidence that drugs at least ARE a huge money sink. The United Nations Office on Drugs and Crimes World Drug Report for 2011 (though it refers to statistics from 2009) puts the market for cocaine at $85 billion and opiates at $65 billion. They also had analysis for amphetamines and cannabis, but this report didn’t give a total value for those markets. Haven’t yet done a comparison, but this does demonstrate a pretty significant market if nothing else.
2011 report: http://www.unodc.org/documents/data-and-analysis/WDR2011/World_Drug_Report_2011_ebook.pdf
From: http://www.unodc.org/unodc/en/data-and-analysis/WDR.html
Again, this is from a few minutes a googling. Haven’t found anything on the gun market yet…..
Here’s some interesting data from this year: http://www.wheresgeorge.com/wrapper.php?page=denom
What’s interesting is not the amount of bills per denomination. No, the thing that should surprise you is that the total amount represented by $100 bills is the second largest. 467 mil in $20 bills, 266 mil in $100 bills. Now, you won’t find those in American wallets. So where are they?
But the real kicker is the Euro, where the statistics are more well known and more trustworthy. Check this out: https://en.wikipedia.org/wiki/Euro_banknotes#Statistics
Incredibly enough, there are as many € 500 bills in circulation as there are in total for other denominations (500 million). And yet, you never see them. Of course, this could have many reasons, but most people take it for granted that these bills are primarily used for money trafficking.
I don’t know about the people in your neighborhood Anders, but around here were I live, it is very rare that someone buys a house with lots of cash in a paperbag. That is usually reserved for shady transactions, like setting up a shill company by the Swedish military intelligence (MUST).
Same with food. Yeah, a lot of cash is changing hands, but it is usually small amounts that just circles around from consumer to supermarket to ATM back to the consumer, in a steady-state of the number of notes in circulation. I do not see how a 500 € note will enter that flow.
We were talking about the size of different markets, right? Not limited to cash transactions. For guns to be a big market, you’d have to include all military and police weapons and those aren’t bought with cash either.
My take on how to assess the size of markets was to look at ordinary people, and what they buy. If I look at myself, my biggest expense after taxes is food. Maybe like 20% of my gross income. The mortgage on my house, another 10%. Transportation, maybe 5%. I don’t have a car, but many do, and their transportation costs would be higher. Maybe 10-20%.
I don’t know how much of my taxes is used by the government to buy guns for the military and the police, but I’d be really surprised if it was more than 1% of my gross income.
Drugs… yes those that are addicted sink a lot of money into buying drugs, but since we’re talking about an average among all the people in the world, most of which spend zero, I suppose drugs couldn’t represent more than a one-figure percentage, and that food, housing, transportation and maybe clothes are larger markets.
According to the book Aspekt Samhällskunskap 1b (Lundberg, Olsson and Arvidsson 2011) the average Swedish household spends 2.11% of their income on “Tobacco, Alcoholic Beverages and Narcotics”
It’s an interesting concept for tapping a heretofore ignored pool of capital…but…
given that the drugs intermediaries largest market is still the US and that they already have massive holdings of USD…why would they want to expose themselves to the currency fluctuation risk and directly risk devaluing their existing holdings….
Also, their raw material suppliers, do not trust anything else and would not accept anything else…also the suppliers often have direct contact with various US agencies such as CIA and Army….who they do business with and for…so they won’t want to irritate them unnecessarily….
This is a quite relevant objection (especially seeing that the US, specifically the CIA, is claimed to be involved in quite a bit of opiate production in mid-Asia, too); it would be in USD holders’ interests to keep the trade volume of USD going.
In my mind, it would be about creating a value proposition strong enough to make the switch, as in any inertial financial process.
Still, the article was mostly intended as food for thought, rather than a serious proposal (but you never know who picks up on it).
I like how you point out that most of the euro crisis could be solved with “the stroke of a pen”. But the underlying geopolitical interests can not. Sadly you do not hear any politicians or the media talking about this. All they talk about as a supposed solution is to reduce spending. Instead of mentioning the fact that if Europe was able to issue the global reserve currency we’d even be able to increase our spending for a while (since all of Europe together has a lower deficit than the US).
I’m sorry, this is rather confusing.
It could be that I’m tired or just not educated enough in these areas, but I thought GEOpolitics had something to do with who controls what, like countries, borders and stuff, and what does the illicit market have to do with economic crisis? Sorry, it feels like I’m just unusually stupid tonight.
However, that wasn’t what I wanted to say, but instead this: It is good for citizens to be able to pay without governments having too much control over it, like today’s bank and credit cards where all data is logged and even transferred to the USA via the SWIFT treaty to be scrutinized for “financing of terrorism” etcetera. Frankly, cash is the only anonymous money transfer system that is widely in use today, and it is everybodys damn responsibility to keep it anonymous and keep it in use. Otherwise we won’t be able to buy what we want and need if and when things take a turn for the worse. I mean, it’s not that unlikely that payments to VPN providers, support for the Pirate Party and other privacy- and freedom of expression- friendly organizations and such will be classified as supporting terrorism by the USA. And that soon, too. And then little Sweden will follow Master USA’s command and prosecute and imprison and/or heavily fine the people doing that…
I refer you to Herman Schwartz’ book Subprime Nation that I recently finished. He explains in much more detail the dynamic that you point out, that use of your currency constitutes an investment in your economy. However, I don’t think that monopolizing the illicit markets will be as effective as you would like until you also have euro-dominated corporate currency shifts as a means of tax evasion or direct investment.
” the USA is already dependent on finding debt buyers for 1.5 trillion of USD deficit per year.”
No problem during the days of fiat money. If necessary, the money comes from a digital printing press. That’s how they bailed out US banks. That’s how ECB bails out Spain. Thats why few Greek banks have failed: The Greek Central Bank has printed money and given it to the banks without collateral.
500 euro notes are used to store value in the boxes in banks. That way nobody knows that you have money.
Since 1971, the occupied oil producers have had an obligation to purchase US debt. Go figure. Do you think their investments in the US debt is safe?
Do you think the investments of Statoil are safe? Do you think those investments are voluntary?
That’s why the oil producing countries have not yet been covered in gold and there is no inflation. Without the US deficits the western economic system would have died.
Anti-Jihad propaganda seems to be fed by a government as a black psy-op to make you complacent with this fiat dollar, occupied oil producers system. Do you now think Anders Breivik from an oil producing country missed the point completely?
If a spy offers you a cash payment, did he get the money from government or did he just rob somebody. They swindled 1 billion from Iraq.
[...] Forderung nach der Legalisierung des Besitzes von Kinderpornographie für Schlagzeilen sorgte, schlägt nun vor, mit 1000,- 2000- und 5000-Euro-Scheinen den Euro zu retten. Dies würde den Euro attraktiver für illegale Geschäfte machen und daher diese Gschäfte vom [...]
Good points, and yes this is stuff for geopolitical game play.
But groups such as the trilateral commission, the CFR and bilderberg and the IMF decide if this
should happen or not.
It’s not so much in the hands of the puppets (politicians)
Not saying that you are a puppet, you are more like snake plisken in a prison already built.
[...] článku je Rick [...]
Your assumption that those bills can be made without political decisions is wrong. In at least one country (Italy) those bills would currently be illegal under national law because it’s illegal to transact in cash if the amount is above 1000 euros. Therefore all but the 1000 euro bill are something no one can give you to begin with.