The European leaders are learning the lesson known to all monetary authorities throughout the ages. The main foundation of all money is trust. Once trust evaporates the currency collapses. It is like chasing after a wild animal let loose out of a field.

Is the European currency doomed to failure? No. The supranational European Community system is far more robust than any flawed plan for a currency. European unity is a powerful and ineluctable force, stronger than any politicians or self-serving group.

There is a plan for the European currency that will get the approval of all major sections of Europe. It would also make it extremely difficult for blackmail operations by speculators — that is those who try to use the markets for immoral, selfish purposes.

On 10 February 1953 the European Coal and Steel Community introduced Europe’s first Single Market. With a single market it was necessary that eventually a single currency would have to be built on the five institutions. The first Community had its own European tax, based on production, not currency or accountant-adjusted profits.

The idea of a currency was already implied in the Schuman Declaration of 9 May 1950. When the time was ripe, it should be built on the principles of supranational democracy.

When they created the euro, the European leaders did not follow the concept of a supranational democracy backing up the European currency. They thought they knew best. The naive or willingly ignorant politicians made an international currency based on so-called ‘good intentions‘ and their equally faulty theory of human nature. They made their decisions in secret, relying on their own instincts and personal and political attachments to each other.

Just make all the currencies relatively stable,’ they said, ‘convert the name to euro and, Hey Presto! you have a European currency!‘ They seem to think if they invited some darker culprits to join the euro gang, then they would appear white in comparison. It does not work that way!

And it was inevitable that the markets would test their theory and practical failures to destruction if they could. That is the nature of markets. It proved a vapour of self-deceit. The political ‘partners’ cheated on each other. They used the coffers of the ‘own’ States as their own party campaign funds. They cooked the statistics.

In a commercial company if such things were done, it would not only mean that the executives were fired, they would enter the gates of the local prison for a long stay. It’s called embezzling. For some reason, politicians think that they are above such justice.

With the introduction of two further European Communities a broad range of other goods had to be brought into as Single Market, from fissile material to agricultural products. In the 1960s intra-Community trade was based on units of account later known as the ECU, the European Currency Unit. At a time when no one imagined the US dollar would be devalued, it was defined and set at parity with the dollar in terms of gold.

Then President Nixon took the dollar off the gold standard. So the politicians decided that they would remain on the gold standard. But France’s Franc proved to be weak and de Gaulle did not want to be shown up. He was concerned about his rural and agricultural voters. Solid, honest money proved too hard for other light fingered politicians.

They fudged the matter. They brought in a highly complex system of compensatory funding. They were supposed to be temporary. Guess what? These handouts of tax money to the politicians’ favourites became permanent and more and more complex.

The second fudge was not to use any standard at all but to make the currency up as they went along. Look ! No Hands! The European Currency was not based on US dollars based on gold. It was not based on gold. It is not even based on GDP. It is based on crooked statistics!

When the ancient kingdom of Lydia (now western Turkey) created a coinage that was used far and wide as a trading aid, it did so by assuring that the coins had

  • a standard weight
  • a standard purity, either of gold, or silver or of electrum, a natural mixture of the two.

Coins replaced the earlier system of just weighing out a specific quantity of metal as a means of exchange. That required a system of standard weights. Some people cheated with the balances.

The earliest known legal code — the Laws of the old Babylonian kingdom of Eshnunna which predates Hammurabi — showed that wheat and barley were considered much more prized as exchange than money. The interest rate on the cuneiform tablets show barley had an interest rate of 33 percent while silver had only 20 percent. Food was more valuable and it was also perishable. Food is real. You cannot eat gold.

Two and a half thousand years ago, Aristotle, the Greek philosopher and royal tutor, warned that there was a big difference between economics (dealing with running the household) and chrematistics, the immoral (and ultimately senseless) hoarding or accumulation of wealth. There were three goods, an external good, a good of the body and a good of the soul.

Some of these principles were applied by his Macedonian student, Alexander the Great. Millions of coins were struck across his empire with a specific image and of standard weight. The museums and private collections of Alexander’s silver tetradrachm indicate the fine detail of the coin production. It created a common external good. They circulated from Britain to Afghanistan, in Africa and beyond. The gold coins were known as philippi, after Alexander’s father.

They were not easy to forge. At least in those days. Later generations shaved the rims of the coins, or forged them of inferior materials. That is what some European leaders are trying to do electronically today.

Everyone seems to be at it. The modern Greeks were the most flagrant. They probably did not have to learn much from the others. But they took the cheating a bit too far. Some politicians wanted to ignore the common politicians’ problem and they persuaded them to let the fiddling go on for years. The others tried to put an end to it.

Remember the politicians were the people who gave you the Meat Mountains and Wine Lakes. Monetary fraud was less obvious and more devious. It is easy for one or more (in this case, many) States to illegitimately exploit the huge benefits of a common currency. They let the others keep the rules, remain honest and keep their books straight. False statistics didn’t really fool anyone but no one wanted to cause a scene and shout: ‘CHEAT!’ at fellow politicians. They knew that once the blame game started all would be found guilty ins some sort of dubious practice.

And if they kept their mouths shut as many did, they would also be found guilty and irresponsible towards their own electorate because they had promised to keep their own currency solid and follow the common rules for the euro. Guilt by fact or guilt by collusion and association, that is the outcome of secret meetings without public accountability. That’s why Schuman said that the Community democracy should be open with open meetings subject to public control.

Then the European Statistical service, Eurostat, put in the knife.

    The reliability of Greek government deficit and debt statistics has been the subject to continuous attention for several years. The Greek general government data reported by the authorities have been persistently contested by Eurostat, far more frequently than for any other Member State.

That’s what the European Commission had to admit in the end. The Commission published a report about the fraudulent Greek stats in January 2010.

On 2 and 21 October 2009, the Greek authorities transmitted two different sets of complete Excessive Deficit Procedure (EDP) notification tables to Eurostat, covering the government deficit and debt data for 2005-2008, and a forecast for 2009. In the 21 October notification, the Greek government deficit for 2008 was revised from 5.0% of GDP (the ratio reported by Greece, and published and validated by Eurostat in April 2009) to 7.7% of GDP. At the same time, the Greek authorities also revised the planned deficit ratio for 2009 from 3.7% of GDP (the figure reported in spring) to 12.5% of GDP, reflecting a number of factors (the impact of the economic crisis, budgetary slippages in an electoral year and accounting decisions).

Why are budgetary statistics different in a electoral year? Why do they ‘slip’? Aren’t governments managing the budget properly regardless of what year it is? Or are they bribing the voters by giving them goodies from money they do not have? Would the executive committee of a tennis club coming up for re-election be considered ethical if it took out a loan to give free tennis balls to the membership before they voted?

Politicians do not want to discuss when governments are guilty of crimes that would send company executives to prison. Yet we are talking about sums of money larger than those of most commercial corporations. The leaders have to have the courage to treat finances as a non-ideological matter. They have responsibility beyond their parties to the people. And the people should have their say in the management of the monetary system, according to supranational democracy.

A common currency cannot be built when one or many States refuse to keep honest accounts. A Community must be built on values that include honesty to each other. This has huge advantages. An honest interchange builds a Community that cannot be broken. Honesty, the 9th of the Ten Commandments is a fundamental Biblical value on which European democracy is founded.

You shall not bear false witness against your neighbour

Schuman wrote:

‘This idea of ‘Europe’ will reveal to everybody the common bases of our civilization and will create little by little the bond similar to that which in ages past has forged our home countries. It will be a force that will breach all obstacles.’

Unless they realise the futility of any other path, the politicians are doomed to get deeper into a maelstrom of disaster.

The financial realist Robert Schuman — who as Finance Minister and Prime Minister rescued France from widespread corruption and financial chaos after the World War, stabilizing the currency, balancing the budget and attacking galloping inflation — had this additional warning:

‘Ideology or dreams will not change the facts about finances, whether in the State budget or that of the family.’

Stealing other people’s property was wrong in the time of the Laws of Eshnunna and it is wrong today.

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