The European Union has openly transformed into a new Reich. At the same time, the Eurozone follows, with mathematical precision, the path to collapse that all monetary unions followed in European and world history. Nevertheless, there are still sorcerers' apprentices who think they can, using a "Plan B", avoid the inevitable collapse. Their weapon: the culture of ignorance, stupidity and commissioned opportunity that distinguishes the European Left nowadays.
Oskar Lafontaine is one of these sorcerers' apprentices who discovered the cure for any disease affecting the EU (see We need a Plan B!,
translated from the original published in junge Welt on 08.22.2015). Oh, yes! There is a plan B for the EU. It's true! Mr. Lafontaine has discovered it! So, why the lamentations? Why the struggles against the EU and monetary union? Go quickly into your shells! Habemus Plan B!
Let us see. From the outcome of Tsipras' allegedly anti-memoranda government, Mr. Lafontaine draws the following conclusion: "We have learned one thing: as long as the European Central Bank, which claims to be independent and apolitical, can turn off the tap of money to a left-wing government, a policy oriented towards democratic and social principles is impossible."
Really, we should all worship the foresight of Mr. Lafontaine. He has finally comprehended what was known since the first central bank, namely, the Bank of England, was established in 1694. Whoever, in an economy, controls the right of issue, to create and offer money, controls the economy almost absolutely.
Drawing by Michalis Kountouris, efsyn.gr
This fundamental point - who should have the right of issue - has preoccupied man since ancient times. Aristotle established the distinction between "money" (chrima) and "currency" (nomisma). That money involved the accumulation and generation of interest, Aristotle saw as being against nature. Currency, meanwhile, is the product of the law, that is to say of the city, and its mission is to operate as an intermediary in transactions, attempting justice. Currency being in the hands of the law and of the city, Aristotle considered it possible to fight against the transformation of money into a goal in itself (usury, improper profits).
With the beginning of the struggle for democracy, many leading thinkers naturally linked justice in the economy with the right to issue owned by the state. The list of thinkers, formed over the centuries, including John Locke, Benjamin Franklin, George Berkeley, Charles de Montesquieu, Thomas Paine, Thomas Jefferson, and the greatest personality of classical political economy David Ricardo. They all knew that if the issuance of currency is not a prerogative of the State, with the central bank, then the whole economy will be under the stranglehold of the most powerful of cartels: the private banking cartel.
It was with the Free Coinage Act of 1666, that control of the supply of money was placed in the hands of individuals. The creation of the private Bank of England, in 1694, meant that for the first time the State officially renounced its right of issue and monetary control, which, from then on, belonged to the Central Bank but also to the private interest banks behind it. The following centuries have shown that the private control of money issuance is consistent with the most resounding financial crashes, which are now endemic to the economy.
Thus one of the most distinguished historians of monetary systems, Alexander del Mar (History of monetary systems
. New York: Cambridge Encyclopedia Co., 1895, repr. NY: A.M. Kelley, 1978) notes that the English Free Coinage Act of 1666 ushered in a series of commercial panics and disasters which until then had been completely unheard of. And that, between 1694, year of the creation of the private Bank of England, and 1890, there was no period of twenty-five years without at least one collapse of finance and credit, in England.
The same phenomenon occurred in the US. The US president, Woodrow Wilson- who, in 1913 ratified the creation of the Federal Reserve and thus officially gave the entire economy to a cartel of private banks- wrote after leaving office: "The great monopoly of this country is the monopoly of big credits... A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom." (The New Freedom
, New York: Doubleday, Page & Co., 1919, p. 185)
Since its first steps, democracy has been organically linked to the issuance of money by the state and state control over the entire credit system. However, giving the right of issue and the central bank into the hands of individuals is equivalent to the State’s buy-out by the less scrupulous of cartels, that of private interests. This “buy-out” has always been accompanied by an exposure of the economy, but also of society, to the most severe financial crashes, first of all because of unbridled speculation on debt.
Therefore, what is happening with the euro and the European Central Bank is something perfectly well expected. At the very least, for anyone who knows the history of monetary systems.
And how does Lafontaine intend to solve the problem of the right of issue that, in the Eurozone, Mr Draghi holds? In any case, not through a national state currency. For some strange reason, Lafontaine passes quite close to the only solution which, since the days of Aristotle, has been considered the starting point for the fight against illicit profits and usury. He passes over it as if it were something absolutely trivial and secondary. Moreover, he manages to identify the solution with the nationalist far right.
What is worrying, with Lafontaine and all who think like him, is not just the fact that they throw in the trash more than two centuries of social and political struggles for democracy, which were organically linked to the creation of a national government currency. Their baseness is such that they do not hesitate to place Marx
himself in the nationalist far right because, in 1848, he claimed: "All private banks will be replaced by a state bank whose bonds will have the character of legal tender. This measure will make it possible to regulate credit in the interests of the whole people and will thus undermine the dominance of the large financiers. By gradually replacing gold and silver by paper money, it will cheapen the indispensable instrument of bourgeois trade, the universal means of exchange, and will allow the gold and silver to have an outward effect. Ultimately, this measure is necessary to link the interests of the conservative bourgeoisie to the revolution."
(Demands of the Communist Party in Germany
, point 10, March 1848)
And here is what Lafontaine offers as plan B, instead of the euro: "I appeal to return to the European Monetary System (EMS), taking into account the experiences we have with this system and improving its construction, in the interest of all countries involved. The EMS has worked for several years, certainly not without friction, but better than the euro."
Yes. The EMS was the response of France and Germany to the collapse of Bretton Woods. The introduction of the European monetary system was based on stable but adaptable exchange rates. The exchange rate mechanism involved the currencies of all member states, except the UK.
The principle is: the exchange rates are based on key prices set according to the European Currency Unit,
which represents the weighted average currency involved. From the ECU central rates were calculated a set of bilateral parities between currencies that could not exceed the margin of +/- 2.25% (with the exception of the Italian lira which had a margin of 6%).
Due to the EMS, reduction in the fluctuation of exchange rates became the core objective of each member State’s economic policy. This could be achieved through the convergence of monetary and fiscal policies. Thus neoliberal austerity policies were introduced in the countries of the EEC.
In March 1983, Mitterrand completely abandoned the joint program and adopted what is now known as the "austerity turn", that is to say a series of policies to adjust France to globalised markets but also to preserve the franc in the European Monetary System (EMS). Thus, the first priority was the fight against inflation: wages were disconnected from prices, taxes increased and subsidies to public enterprises were cut.
The EMS brought austerity to all the countries that participated. The only function of the EMS was to prepare the convergence of economic policies in terms of open borders and markets to create economic and monetary union, with the introduction of the euro. It helped nothing. Not even the stabilisation of exchange rates.
Britain entered the EMS in 1990, when the movement of capitals liberalised. The system of fixed exchange rates and free movement of capital proved to be an explosive mixture. In addition it also facilitated currency speculation. Thus, on September 13, 1992, Italy decided to devalue the lira by 7%. Britain dramatically left the EMS, September 16, 1992 (a day which remained in history as the "Black Wednesday") because it was no longer possible to maintain its currency in the variation margin.
So then, where does it come from that going back to the EMS would be a better solution than the euro? When did any international system of fixed exchange rates survive and what was this system? Why Lafontaine does not see the obvious? Which had been valid for centuries? The only possible way out of the fixed exchange rate systems and common currencies gone bankrupt, is none other than the introduction of a state national currency.
Moreover, it is only under a state currency regime that democracy can exist and that it is possible to follow radically different policies based on the interests of the vast majority of citizens. As long as the Lafontaine band does not accept this evidence, they will be sentenced to invent fanciful plan Bs, which can only ridicule them or allow it to operate as a showcase of the most shameless speculators. Do not forget that the great winner of the EMS was Soros who pushed it to its knees and forced the British pound to exit.