We figure that the Wall Street Journal either has a black list, or restricts the number of letters from a single individual they even bother to read. Possibly both. In any event, right after the editorial to which we responded on August 14, the Journal had another one on the European debt crisis. Not astonishingly, our analysis was similar. Even less astonishing, the Journal didn't publish this letter, either.
The Eurozone's problems are a direct result of being the first currency based on the principles of "Modern Monetary Theory." Per Knapp's "chartalism," the money supply consists entirely of State-emitted bills of credit. A bill of credit is backed solely by the present value of future taxes, i.e., the "faith and credit" of the issuing government. As the productive capacity of the European economy erodes, the present value of future taxes declines.
Paradoxically, transforming the Euro from a debt-backed to an asset-backed currency is simple, although not easy:
• One, phase out central bank open market operations in government securities.
• Two, supply liquidity to the private sector to rebuild the tax base and spur economic growth by discounting and rediscounting qualified bills of exchange.
• Three, implement an aggressive program of expanded capital ownership financed by discounting bills of exchange collateralized with capital credit insurance, thereby increasing consumer demand naturally to sustain the economy and reducing the need for State assistance.
• Four, as tax revenues increase over costs, pay down the debt, eliminating debt-backed money from the economy, stabilizing the currency and providing a foundation for sound economic growth.