Why the EURO is a ...scamcoin

Around 15 years ago several member states of the EU adopted the Euro in order to replace their national currency. The change had actually occurred a bit earlier (on an accounting basis) but "tangible" banknotes and coins first circulated in January of 2002.

Fast forward to now and the Eurozone is in a huge mess. Pretty much all EU countries that didn't adopt the Euro are doing much better. Some that haven't adopted it, don't even want to - for pretty good reasons. 

 

 

The problem is that millions of people were promised, even assured, of a very bright future with the Euro and the monetary integration. Instead, Europeans got something entirely different.

Defining a scam

According to Google:

Scam is: "a dishonest scheme; a fraud"

And that's precisely what the Euro is.

 

 

The EURO has all the elements of a dishonest and fraudulent scheme. For those who know about cryptocurrencies, and altcoins in particular, we hear about cryptocurrency "scamcoins" and "shitcoins" and we can't fathom that something similar can happen on such a large scale involving the official currency of hundreds of millions of people. But it actually happened.

I find the term "scamcoin" as a very fitting analogy (notwithstanding the fact that the fiat monetary system is inherently a scam, although the Euro is setting new standards). 

Analyzing the scam

1) False promises to gather public consensus 

-The common currency was "sold" as a move that would unite the people of Europe. Instead it created divisions and "tremors" inside the EU.

-The common currency was "sold" to the poorer countries as something that would lead them to gradually "converge" with the richer countries. This was a huge lie - as the Euro had no such inherent characteristic.

-The common currency was "sold" as a way to increase monetary stability for the member states. Again a huge lie, as the new currency introduced a wide range of funding uncertainties for bond holders, bank liquidity, pension funds, government budget deficits etc which in turn led to huge fluctuations in the market. 

2) A "cheerleading" attitude that concealed future problems

The cheerleading surrounding the Euro was used to conceal valid criticism and publicity about all the problems that would arise. The list is by no means extensive:

2a) All pension systems that were designed based on the assumption that a country would fund future payment deficits with the issuance of more national currency were instantly doomed to fail as that funding option was killed. "Pension fund viability" excuses would then be used in most countries to implement "insurance reforms". This became a nice way of saying that the establishment will loot people's pensions.

2b) All member states running budget deficits would now have to live with the huge uncertainty of market funding instead of having the safety net of issuing their own currency. This type of uncertainty would incur a lot of extra interest cost to the taxpayer. And this interest would typically flow out of the economy (foreign banks and funds) while in the past bondholders in national currencies were usually citizens of the same country.

2c) All debts that were issued as national currency (pre-Euro) would have to be repaid in Euros. Obviously this is impossible (since a country does not have such a currency and it cannot issue it), so for most countries with a negative trade balance and slow GDP growth such a thing is completely out of question. In this case there are only two scenarios

- Perpetual refunding of the debt and pretending it is viable - until the markets think that "it isn't" (hint: it never was)

- The sale of state and private assets to increase EUR inflows that can then be used to repay EUR-denominated debt. The Euro, in this case, serves as a looting mechanism.

3) Violating its own "rules" to increase the attack surface on possible victims

The Maastricht treaty that paved the way for the EURO set the debt-ceiling for admission into the currency at 60% debt-to-GDP ratio. If a country was over that level, the debt that would be converted to Euro would obviously bury that economy. Yet countries like Greece or Italy were admitted with ratios closer to 100-110%. These levels are over 60-70% more than the pre-agreed ceiling levels. 

Please note that these numbers were always public data - there was no "cheating" involved by anyone. It was about bending the rule book in order to bring in more victims to the scam.

4) Converting government funding from guaranteed to inherently unserviceable

A country issuing its own currency will always have money to 

a) Repay its bond holders in national currency

b) Pay public sector wages and pensions

c) Provide liquidity to the banks and guarantee all deposits

The only question is whether the inflation will rise if the government suddenly has to issue a lot of money. 

Other than that, the national currency system is considered zero-risk and hasn't any history of failures (unless a government specifically chooses to not bail out a bank, or not repay a certain debt - but that would be through a political decision and not an actual inability to find money). 

Now imagine a country with what used to be 100 billion euro worth of debt in its own currency (zero risk / easily repayable) being converted to a new currency that the government couldn't issue.

A situation like that signifies that the government suddenly needs to find a lot of this currency from abroad (as it no longer issues it).

The government will either have to issue new bonds to repay the old ones, or, if that option isn't available, start selling state property or assets or indirectly force citizens to sell their assets and properties to buyers from abroad. In this way, an indirect looting mechanism is established.

5) The scam from the citizen perspective

Imagine you live in Greece in 1999. 

You are told that in 2-3 years your country will be entering the Eurozone and that this will mean an era of convergence with the average European salary and much higher prosperity. (false promises)

You are told this is of great benefit to the country (lie) because now the country won't need to hold foreign reserves to buy things like ...oil - since the Euro will be a very powerful currency that eliminates currency dangers.

You are never told about all the problems that will arise from adopting the Euro.

2002 arrives and the banks start rolling out Euros from the ATMs. Politicians repeat that the vision of "Convergence" is now closer (lie - essentially the country has just bankrupted itself by the adoption of the euro)...

As years progress, you realize that what you were able to do with your own job income is now next to impossible - and you now need an ever increasing amount of loans. Loans, credit cards, etc are needed in order to even maintain a normal level of life - even while one is cutting down on expenses.

A rising inflation and a relative stability of wages mean that buying cars and homes start to become increasingly difficult or impossible compared to the past: In order to start buying such assets, mortgages and car loans have to be issued - some times putting you in debt for decades. Instead of converging on salaries, you start to understand that the "convergence" is about ...converging on being a debt-enslaved society with other countries that are "later" in that particular "game". (promises destroyed by reality)

Fast forward to 2010+ and you start realizing that the "markets" have somehow acquired too much of a power on whether to bankrupt your country or not. But how did that happen? You find out that all the national-currency debt was converted to a currency not issued by the country itself and as such the country can no longer print money and guarantee debt repayment. A mountain of Drachma denominated debt (easily repayable) became a mountain of Euro denominated debt that was impossible to be repaid. (disillusionment)

The politicians are starting to threaten you that if taxation levels and insurance fees don't reach absurd levels (even >100% on income) then the country will go bankrupt, the ATMs will stop supplying money and everything will be in chaos. (oooops - we lied and now we threaten you). Oh, and they also have to loot the pension funds and partially default on their multi-GDP-level long-term obligations. (huge scam alert). 

Average wages will also have to go down, which along with increased taxation, reduces purchasing power to levels last seen pre-1980. Instead of "converging" with the average European, you are now "diverging" towards the poorer states of the EU.

In the meantime you are also informed that your ATM will no longer allow you to take your money out. You ask yourself why? Aren't my deposits guaranteed by the European Central Bank that replaced my national central bank? Isn't the role of the Central Bank the role of the stabilizing force that injects liquidity when needed to prevent systemic crises? (ooops - that doesn't apply for the ECB!)

You then understand the magnitude of the scam:

Upon entry into the Euro, the ECB only "exchanged" a tiny fraction of money that was the M0 (coins and banknotes in circulation). But at the same time all state debts and bonds had to be paid in full and in Euros. All private debts, mortgages, credit cards, all had to be paid in full and in Euros too. Yet bank deposits are not converted into Euros or even guaranteed for their conversion. (scam alert) 

Deposits are sitting in the bank as fake / digital Euros - UNBACKED by the ECB. If people want to go to a bank and withdraw their money, they can't. The state (=the taxpayer) has to get a loan by other countries to ...supply the banks (!) for what is a normal financing operation that the former central bank would assume upon itself. So all debts (bank loans to private people, state issued bonds, etc) "have" to be repaid in Euro, but the deposits of the bank ....do not (!) because the ECB does not properly function as a central bank and cannot insure people's deposits (!!!). Instead regulations and laws are passed that favor "bail-in" type of haircuts because the ECB will not assume the role that a Central Bank should have. When it has to pay your deposits in Euros it pretends that it's not your central bank. But it's always there to collect EUR-denominated debts.

All the money / Euros that you thought were in the banks? Well... they don't exist. It's vapor, because the ECB refuses its role to back the electronic asset (Euro in a bank account) with papers and coins. (I can't repeat SCAM often enough)

Note: Nearly 150bn euro in deposits are currently held "hostage" by the ECB in Greece - for what a national central bank could easily do: Print the currency and allow all people to withdraw their money if they like. But with a national currency there would not even be a bank run, because there would be zero uncertainty on whether the nation can print its national currency.

In the meantime....

...the EU countries outside the Eurozone start to understand that it is not necessarily in their interest to adopt the Euro. All their budget and banking financing that is now possible with their own means and national currencies will stop being possible - unless "the markets" and "the ECB" desire so. 

Even if the citizens do not understand the precise mechanisms they can see that Eurozone members are not doing very well - in fact growth in Eurozone countries is extremely worrisome compared to the much healthier economies outside the Eurozone.

For the countries that are already in the Euro, unless they have very low interest rates on their bonds, good growth, trade surpluses and a very healthy bank sector, they are likely to fail in some spectacular way down the road. 

This failure is not accidental. It is mathematically ensured that it will happen. And that's why the Euro was not really "designed improperly". Instead it was designed to catalyze the political union by manufacturing economic crises. 

You create a problematic currency, then say "ohhh it has problems without a political integration" and then bring a semi-forced political integration that the people of the member states don't really desire. This adds a whole new dimension to the scam. Not only is the Euro used to promote debt-enslavement and the economic oppression of entire countries, but it is also used as a tool to circumvent the people's opposition to political integration through a manufactured crisis.

Another analogy as a conclusion

If the Euro was a product, we could say that it was "marketed" with certain promises. Yet, it has failed to deliver. Its "manufacturer" has also concealed from public awareness all the defects and problems that would emerge from its use - defects that would ensure that the promises were unable to be kept anyway.

Entire countries that "bought" into the euro brought upon themselves a financial disaster that is impossible to handle in the long-run. The citizens of these countries have lost in terms of income, purchasing power, future security (pensions), employment opportunities and in some cases they have even lost access to their life's savings. 

The "manufacturer" will now ask the "buyer" to double down by "purchasing" something more (political integration) in order to "fix" the problematic product.