NSAgate & the refusal to host Snowden, TTIP-negotiations and the enforced alienation from Russia, which is diametrically opposed to its very own longterm interests – by all appearances Europe has ceased to exist as a political category. Only now citizens from Lisbon to Warsaw are becoming aware of it. Some say, that the so called unification project has been an american one right from the beginning. Others think, that the final “Taming of the Shrew” took place as late as 2010-2012 with the Euro crisis. My best guess for this to have happened would be the time around 9/11, when the transition to “euro-freegold” should have taken place, but did not.
In my book and corresponding blog posts here and here I hint at the fact, that big part of Europe’s original integrationist movement had been funded by US intelligence services and that even the commission’s predecessor, the High Auhority on Coal and Steel, had to be bankrolled by the US. At that time, at the height of the cold war, Washington thought, that a unified Europe would be the best counterweight to the red empire, which had reached the pinnacle of its power. But the creation of a a specifically westeuropean defence union failed.
Washington had wanted it badly, but it had been unable to incentivize Europe, especially France, to build a common military force against Stalin, a very uncanny neighbour. Uncle Joe was much nearer and a lot more threatening than Uncle Vladimir is today. But then – maybe the Americans did prefer NATO anyway, which is and always will be their uncontested home turf.
And frankly, much of the Soviet threat to western Europe at the time was a pretext to achieve political ends (I don’t mean middle europe here, including special cases like Austria, where Stalin was eager to consolidate what he had “earned” in Yalta. In his thinking eastern middle europe “was his” and rightfully so.)
The Euro crisis in 2010 might have been the last straw, that broke the camel’s back, but I seriously doubt, that Washington and New York did more than consolidate their grip on the old continent. While one has to understand, that the turbulences with sovereign debt were used to impose a political union on the nations and that the US may have forced the hands of european leaders, I am at a loss how they did it exactly and how they managed to stabilize debt “markets” almost single handedly.
There is a lot I don’t understand about central banking, but surely the ECB uses the same tools as the Fed: derivatives and unknown/undisclosed CB actions, which have kept the monetary base expanding, interest rates falling and banks solvent – also in Europe.
But the gist of my story would be this: Americans have succeeded in subverting the initial set up of the Euro and when the Euro crisis broke out, this had already happened years ago.
Designing an emergency currency
The history of the european “money” reaches back way beyond 1992, when the Maastricht Treaty was signed. The first plans for it were made in the 1970ies, initially to replace the US Dollar as international key currency. But it was meant to be a reserve currency in a very special sense. They did not think of another unbacked money to be used to satisfy the needs of central banks all over the world (the needs for a reserve medium).
No, the new currency was supposed to be a historical first; a currency which worked fine for international trade, but lacked the function as a store of value – which was to be fulfilled by gold. There was to be no (inflexible) link between the currency and gold.
Granted, this story is not what you are offered, when you look at Euro’s “official history”. But it is what you can read here. This blog is based on the writings of two anonymous posters in an obscure forum between 1998 and 2001: Another and Friend of Another (FOA). Their posts show a deep understanding in a range of economic matters, probably both of them had been working for monetary authorities themselves.
Today’s host of the site, FOFOA, extracts what he calls his “freegold perspective” from their writings. It is an angle, which is closely intertwined with the Euro (or what it originally was supposed to be). The site is a mixture of facts and inferences, FOFOA draws from Another’s and FOA’s posts.
You can call them speculation, but it is definitely not the run-of-the-mill speculation, you can read everywhere in the internet. It is a well-argued perspective of its own. There are a lot of interesting musings on the workings of what FOFOA calls $IMFS (dollar international monetary and financial system), the relation between oil and gold or the role of “old money” and its way of acting throughout generations. I cannot touch on these topics here (apart from the fact, that I do not understand in full some of them).
They in itself are no proof whatsoever. But they show, that the guys in question knew what they were talking about. The idea, that their employer had been the Bank of International Settlement, the central bank of central banks, sounds reasonable to me.
It was Basel, where the (functional) design of the euro was drafted over a period of two decades.
According to the narrative early Euro planners had been shaped by what they had experienced after 1966, in the twilight years of the gold backed dollar: France’s “run on Fort Knox”, the collapse of the London Gold Pool, the closing of the gold window in 1971, etc.
For them it was self-evident, that a purely symbolic money was to meet its death rather sooner than later, but also, that events had proved it impossible to uphold a fixed connection between a certain amount of gold and a currency unit. They concluded this from the failure of different types of gold standards after the First World War.
So they drafted a new type of currency or rather: a completely new financial system. One that could replace the system of the free floating, unbacked dollar of 1973, while avoiding the flaws of another gold standard system.
For the BIS opperatives it was clear, that the unbacked dollar would have to be “supported” for a while, in order to avoid a monetary crisis. If the old system broke down before a new one was in place, a conflagration with unforseen consequences would occur.
In essence the new model would have rested on a mixed system and it would have been centered around gold as a “reference point”.
The function of money would have to be split in two: the store of value part (SOV) would have been fullfilled by physical gold and the function as an international medium (MOE) of exchange would be transfered to a newly created currency, that would be able to maintain a rather stable exchange rate to gold: the european currency in its original version.
This Euro had to be a prototype with unique features: A currency, that had severed its (fixed) link to gold as well as to a nation state, to paraphrase a formula, that was used by the first ECB president Wim Duisenberg. To gold, because the metal is not accounted for at a fixed value in ECB’s balance sheet and to the state(s), because the ECB was supposed to have no obligation whatsoever to care about the financial and budgetary needs of a state (what would result in the debasing the currency). According to the “founding fathers” this is, what the Euro was about originally.
Now, the subtitle of FOFOA’s blog is not by accident “A Tribute to the Thoughts of Another and his Friend”. FOFOA gets most of his insight into $IMFS from Another and FOA. This tends to make him forget, that they were humans in time and space, too. Persons, far from being completely informed; actors, who had a dog in the fight as they obviously were deeply involved in the making of the Euro.
From my point of view FOFOA is using two different sources: Another/FOA, the system savies and Another/FOA, the biased stakeholders of a new currency in the making. The first ones may have provided invaluable information, which was not available elsewhere, but the “second group” had succumbed to bad information, wishful thinking and delusions. FOFOA takes them both at face value.
What the second Another/FOA-combo has regarded as a fait accomplis, might not have been one. Unforeseen problems might have arisen, decisions could have been reexamined and overturned, the dollar faction could have derailed everything. There is a lot that could have happened.
So currently we have the year 2014 and Another’s last post was in 2001.
The US Dollar is still around, although highly contested as a trading currency. With respect to its ability to store wealth, everybody is in doubt, but nobody seems to know something better. At least nobody out in the open.
On the other hand nobody considers the Euro as hopeful princeling of old “King Dollar”. No one thinks, that it can act as main road to gold or has trust into its ability to function as a “lubricant” for trade. Even if you trust figures published by the ECB, there are a lot of reasons to think, that today’s Euro is not what it was supposed to be.
Today’s Euro seems to have more in common with other fiat currencies than with its original setup as described by Another and FOA. There is no conclusive proof, but there are a lot of leads in this direction, beginning for example with the ongoing dilution of budgetary (Maastricht) criteria as is explained here – and extending to the core of ECB’s monetary policy: bond purchasing programmes – real ones or the threatening thereof -, softening collateral rules, zero interest rates and help and complicity in sovereign debt forgiveness.
And while some of the tools seem to encourage the euro-banks’ willingness to give loans to the real economy’s, the money could very well end up in member states’ coffers. For example ECB’s new ABS buying programme – even if it is sold as meticulously targeted initiative to shove new credit down the throat of the real economy. But “Geld hat kein Mascherl” as they say in Austria.
Much of this smacks of techniques, third world central banks get into, when they do not/cannot afford to care about inflation and the debasement of their currency; and it reminds of QE and other Fed recipes, which as the “printer” of the world’s reserve currency is in a unique position. Funnily enough, this monetary policy has created a broad common ground with Keynesians throughout Europe (just about everyone), fueling their phantasies of social justice and growth by easy money. (They never talk about the Cantillon effect though or the – “inverse” – redistributive effect of asset inflation….)
So what would the story look like, I would tell about Another, FOA, the Euro, the Dollar and freegold ? Would I cling to FOFOA’s version of the story?
No. My story would run like this: Another’s take on freegold might very well show the intentions of the original architects. And in the end freegolders will turn out to be right (although not necessarily euro-freegolders). The fate of the $IMFS might indeed be inescapable and the proposed split between MOE and SOV is a good idea. And freegold would be more compatible with non-authoritarian political systems than a gold standard anyway.
But this is theory. So far nothing serious has happened. The US-Dollar managed to stay a few years longer on top, maybe with the help of China. No new system has been implemented. Probably the windwow of opportunity for Europe is shut by now – possibly because the europeans did not act rapidly enough. Or because the dollar people outsmarted euro-gold. Or the US threatened/blackmailed Europe with god knows what.
As a matter of fact, today’s Euro seems to be completely subservient to the greenback. It has become a mirror of what our political leadership is to its masters in Washington. The extension of unlimited dollars swaps after 2008 has made evident, that the Euro owes its very existence to the Fed.
On top of that a substantial part of ECB’s physical gold may have found new owners in the new world.
If this is true, it would constitute an additional incentive for the ECB to delay or cancel the whole process, because the arrival of freegold would be the moment of the truth for gold stocks, allegedly held by (the) european central bank(s). The urge to delay and cover up provides a good explanation for the gold receivables-charade, which I described here.
As the case of german gold shows, the mere labeling of the gold reserves is only part of a bigger picture. As readers can remember, Bundesbank has declared – more or less officially -, that 100 per cent of its gold reserves are physical in nature and that more than 1.500 tons are being held by the NY Fed.
After the transition to freegold, a hoard like this would be a substantial part of the german (european) currency reserves – wealth, that would be valued 30 to 50 times higher than today. It would be rather naive to assume, that revaluation of physical gold would take place in a “business as usual surroundig”. And It would be equally naive to assume that nations, which decide to withdraw their bars from New York (and London), would get them back “shortly, without von delay“.
The dollar would be destructed by hyperinflation and in this situation any inclination to export gold would be killed in its infancy.
If the gold is not lent out, you can bet, that it will not be delivered to its rightful owners. There are no courts and there is no business as usual in a scenario like this. Remember? “Necessity has no laws” and “all is fair in love and war”. Of course central bankers are not politicians, who are bound by national interests (they could be worse though).
So Europe might already have forfeited its best chance of becoming relatively independent. For unknown reasons the transition to a new “gold- and euro-centric” financial architecture did not materialize. This could mean, that the original european dream of turning a bunch of small and midsize nations into a truly sovereign international power has definitely vanished out of sight.