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The Eurozone Crisis: the boon for the World Statism

The Eurozone Crisis: the boon for the World Statism

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Viewed in a historical context, the Eurozone crisis is not a separated issue, concerning only Greece or the European financial markets for that matter. The Euro sovereign debt crisis will have a fundamental impact over liberty, ideas and lives of millions and millions for generations to come.

The Past

German and French politicians have created their financial Frankenstein, namely the monetary union as persuasively shown by Philip Bagus in his “Tragedy of the Euro”. It possesses a huge destructive power, monetizes public debt, distorts markets and symbolizes the creativity of politicians and technocrats when it comes to subtle tools for financial control and wealth de-generation and transfer.

In the name of politically centralized power and in favor of export-oriented firms, they substituted monetary competition (even if fiat one) and stable German mark as a corrective benchmark for the centrally controlled and under optimal Euro. Thereby the century-long ideal of Global Government, ideologically defended by Keynesians and leftist all over the world made a huge leap forward.

А crucial moment has emerged as this unstable construction has been logically and inevitably shaken up by its own unsound economic fundamentals. Now either more state is needed in dealing with the debt crisis, or less state. And have no doubts that statist will not miss to give a try and seize the opportunity to expand their power in the detriment of liberty and sound economic ideas.

Paths ahead

Logically, there are two divergent paths possible after the dust of the Greek Government fiasco settles:

First case scenario: general public opinion accepts the obvious fact that Greece is not an isolated case. Greece is the hallmark of the worldwide veneration for the Welfare State, the best and the most zealous student of the Welfare economists, social theorist and populist pundits. However, it is not the only one, for sure.

Undeniably the governments of Italy, Spain, France and Portugal are just as corrupted and problematic as the Greek one. They too have embraced the Welfare State with its immanent characteristics like daunting public debt, unproductively allocated resources and huge state burden over the wealth producer. And this inevitably leads to financial and economic breakdown.

Possible solutions: dissolving the monetary union, currency competition restarted, more subsidiarity and decentralization put into practice. Theoretically conceivable but practically improbable – if not impossible – scenario.

Second case scenario: a tsunami of government-run projects, interventions, regulatory madness and control that is flooding European economic, financial and social cosmos. We have already witnessed this scenario in the aftermath of the Great Depression of the 1930’s. It led to a US government that grew like Topsy and has never shrunk ever since. It is now Europe that is on the spot.

Possible implications: more banking supervision, more financial repression, public debt increase and extremely loose monetary policy to compensate for malinvestments, as well as for the lack of genuine savings to validate sound and productive investments.

Eventually, with more centralization in the monetary and banking field, the fiscal harmonization would easily take place. The Federal European State would gain in power and prerogatives and Statism would be considered as the solution, while the market would be stigmatized and treated as a scapegoat.

One Government, one Treasury

Having a uniform European tax rate and common fiscal policy is the real issue in Europe now. And that is clearly evident in Greece now. Tax hikes are imposed in every productive sector — this is the short summary of what “creditors” have imposed on the Greek government. This sort of tax policy tends to be a modus operandi in the whole debt-ridden Europe.

Privatizing and cutting off of government spending face huge public and political disapproval and will be implemented “selectively” if Greece continues to be backed up by European taxpayers’ money.

However, the fiscal centralization is more obvious to German citizens and needs a big threat to be justified: like the present financial debacle, for instance. Tax harmonization, common debt securities and a common fiscal policy remain a tough issue in Europe. Nevertheless the very presence of a country in the Eurozone before 2010 reduced risk premium, creating some Eurobonds-like effects for the issuers of debt. And thereby promoting excessive indebtedness.

Nonetheless, the easiest and well-hidden part is the monetary one. And inflation tax is always preferred by politicians. This is why ECB came first, becoming a tool for pressure, a carrot and a stick in the same time and setting the stage for further centralization.

What Is the ECB’ role right now?

The role of the ECB is to primarily monetize public debt by financing governments through QE operations and keeping their cost for financing artificially low. It bails-out the insolvent Greek banking sector through the Emergency Liquidity Assistance program (ELA) thus fostering moral hazard and preventing the disciplining effect of fractional reserve bank run to unfold. It also props up financial markets by holding interest rate down to zero, distorts markets and relative prices, actively contributing to perpetual financial crisis and economic downturns. The European Central Bank constantly messes up with the Euro’s purchasing power in an attempt to stimulate export in the detriment of free peoples’ private property. Essentially, what the ECB does is to promote indebtedness and wealth transfer, setting the stage for the next level of centralization. This is how the ECB has become the modern-day financial equivalent of USSR.

Endgame

The leftist/centralized political project — the European Union and its monetary docile child the Eurozone — are on an epochal crossroad which will determine the future path to be taken, with widespread repercussions. The impact of the Eurozone crisis on the global cause for liberty is underestimated. Libertarians and Austrians should be as harsh and as intransigent as possible in their criticism and journalism, so that everybody becomes aware of the most dangerous statist racket in the last two decades. Liberty, ideas and social engineering of the highest order are involved and the battle is certainly of ideas.

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