However the
details end up being worked out, the Brexit has revealed serious weaknesses not
merely in the economic, political, and financial institutions of the European
Union, but in the assumptions that guided — and continue to guide — the
structuring of those institutions. This
has led to an inherent instability that led, seemingly inevitably, to the
Brexit.
 |
| Keynes's Monetary Fables |
We’re sorry to
burst anyone’s bubble, but — contrary to the standard Keynesian assumption that
the government must control the money supply — a strong political union is not
essential to the establishment and maintenance of an economic union or even a
common currency. Very much the contrary:
a sound economic union is essential to the establishment and maintenance of any
political union.
Nor is it
inevitable that economic unions or common currencies lead automatically to
political unions. They can, of course,
but it is in no wise inevitable. As has
happened many times throughout history, a currency union led to stable economic
and financial conditions, but left national sovereignty strictly alone. The Latin Monetary Union and the Scandinavian
Monetary Union are cases in point. Yes,
the Zollverein, the German Monetary Union, did eventually lead to a political
union, but that was the result of other factors that had nothing to do with the
monetary union per se.
The simple fact
is that forming a political union of any kind before a sound financial system
has been installed — or at the very minimum the two go in tandem — is, and has
always been, a serious mistake. Try as
they might, no government that ever existed has been able to legislate either
morality or prosperity. They don’t stop
trying, of course, and the more they try, the more chaotic things get.
 |
| Providing the good life is not the State's job. |
The fact
remains, however, that it is not the government’s job to control economic
activity through money and credit manipulation (or anything else), any more
than it is the government’s job to make everyone a good person. Provide the institutions for it, of course,
and create and maintain the environment within which people have access to the
means to carry out economic activity, and thereby become good people leading
what Aristotle called “the good life” (i.e.,
the virtuous life), but government cannot force people to be productive, any
more than it can force people to be virtuous: in both cases it’s a form of
slavery, and the production and presumably good behavior usually stops the
moment the force or threat of it is taken away.
After all, how many slaves would work if they weren’t afraid of
punishment?
That is why it
is a proper role of the State to set the standard for the currency and
adjudicate and enforce contracts in the event of disputes, but not to create
money (especially backed by its own debt), or interfere in legal contracts, especially
to gain political ends, despite the assertions of John Maynard Keynes, the
chief architect of the modern disaster we call the financial services industry
as well as monetary and fiscal policy throughout the world.
 |
| Sound money is essential to a stable social order. |
A sound economy
is essential to a sound political system.
A sound financial system is essential to a sound economy. A sound banking system is essential to a
sound financial system. A sound monetary
system is essential to a sound banking system.
It necessarily
follows, then, that any hope of achieving a sound political system and stable
social order must begin with a sound monetary system. The fact that the European Union tried to
implement and maintain a stable political and social system while employing one
of the worst money and credit systems ever devised by the mind of man is the
reason for the Brexit, as well as many of the other troubles Europe is
experiencing at the present time.
That this is
happening in Europe is doubly ironic, as recent history gives the most graphic
possible example of the power inherent in a sound money and credit system — and
the danger inherent in an unsound system: Germany after the First World War and
the events that led to the rise of Adolf Hitler.
And therein
lies a tale. . . .
#30#
