Friday, June 1, 2012

Ron Paul, Not Alexander Hamilton, Can Save Europe

In its May 26, 2012 issueThe Economist has several excellent lead stories on the European crisis. It argues for democratic reform, political integration, and EU-wide supervision of banking.  It suggests that the costs of an EU break-up would be high, but the European public lacks an appetite for additional integration. Besides a European banking bureaucracy, The Economist argues for a European assumption of debt, which it calls mutualisation. Quoting Professor Vernon Bogdanor of King's College, London, its writers remind us that Alexander Hamilton fashioned American federalism through the federal government's assumption of debts. 

Europe needs Ron Paul, not Alexander Hamilton.

I do not doubt that a breakup of the European Union would be costly.  As well, I do not doubt that most Europeans, especially the innovative and hardworking ones, would have been better off without it.  In a letter to the editor in the same issue, Alexander Singer of Athens points out that the use of the catchword austerity with respect to recently mandated Greek reforms, in effect rejected in the May 6 election and now being re-polled on June 17,  is misguided.  Peloponnese garbage truck drivers are paid monthly pensions that are 50% above the wage of starting schoolteachers, according to Singer.

Regardless of the merits of Greek public pension policies, they are not market driven. A garbage truck driver who has saved and accumulated a fortune of one million dollars is entitled to an $80,000 pension.   One who has spent 15 years' worth of wages on hookers while sleeping in the back of his truck, only to retire at age 50 on a generous public pension, is not.

Nevertheless, the question is not whether a garbage truck driver should be paid a generous pension, but rather whether the driver produced value to justify it. Decisions about the equilibration of supply and demand are best left to markets; unions' political power allows them to divert wealth from poorer and less politically influential workers to themselves. 

The Greek government has made no attempt to equilibrate marginal wages and productivity, nor does the question matter to most Greeks, who are like children harping for an extra candy bar without an inkling as to from whence candy bars spring. It is evident that, to gratify a nation of childish fools,  the Greek government has, in yet another display of failed democratic processes, stolen the wealth used to pay that garbage truck driver from French banks. Now, French workers will be asked, through a ridiculous election outcome in France, to subsidize the French banks through monetary expansion, supposedly a "growth" strategy.

The economic incompetence advocated by the world's economists offers a convenient rationale for bankers to force workers to pay for their frivolous errors. Workers pay through inflationary policies that reduce real wages.  This is done in the supposed name of the workers themselves. Of course, The Economist's readers (bankers, lawyers,  politicians, public employees, executives, and university professors) are the true beneficiaries of stimulus policies and monetary expansion.  Since the ending of the world's reliance on gold in 1971, workers' real wages here in the US have not increased. 

The solution to Greece's and Europe's problems is recognition that more government causes greater harm.  The way out is through stabilization of money and long term stimulation of innovation and hard work through elimination of unnecessary government bureaucrats, starting with pointless institutions like the European Commission, a body whose purpose requires a Kant-sized metaphysics tome to explain.

Although there were inequities in the federal assumption of the Revolutionary War debt in the United States, there was at the time no doubt that every state had to some degree contributed to the war. There were reasons for states like Virginia and Maryland, which had repaid their war debts, to object to paying off less conservative states' debts. Nevertheless, Hamilton asked none of the states to subsidize unearned pensions for 50-year-old buffoons. In fact, many of the valiant soldiers were deprived of their pay, which was in by-then-valueless continentals.

To stabilize Europe's monetary system, the gold standard should replace the euro.  The European Central Bank should be shuttered, and the profligate French and German banks, which respectively lent to Greece and Spain, according to The Economist, should be put into whatever European equivalent to chapter 11 there may be.

One of the great ironies of the 1980s was that just as the USSR had proved itself a failure, Europe adopted a central authority akin to the Soviet Kremlin's. Every step of the way infertile bureaucratic wasters in the EU have advocated increasing government, regulation, and bureaucracy.  These privileged halfwits, who have produced nothing of value and have overseen a massive real estate bubble and debt collapse, have destroyed value.

As a European currency, gold is a better alternative than the euro  because it is not subject to quack economic theories advocated in places like The Economist, The New York Times, and most university economics departments.  Not one important economist in the world, including The Economist's staff, which spends all its time studying Europe, foresaw the current default-and-banking problems. The European bankers who lent to Spain and Greece are almost as dumb as the bankers in the US who have made one failed investment after the next for the past 60 years and who have survived only by means of one public subsidy after the next.   It is time that the global banking cancer was excised. Businesses that do not produce value, and $29 trillion in subsidies from the Fed so far say that the US banking system has not, need to die.

Recall that it was Hamilton, advocate of federalism, who favored central banking and opposed hard money.  Today, Ron Paul and his colleague Gary Johnson offer a set of solutions that can free Europe from the Carolingian dream of its uniting under a central authority.  Let Europe free itself from the medieval ideas of the Council on Foreign Relations, The Economist and The New York Times.  

A gold standard is how Europe should begin to reform itself.

1 comment:

Anonymous said...

The health care mandate and Romney

And this guy is the Republican nominee?