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Money as gold versus money as water

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  • Colignatus, Thomas

Abstract

The rules of the Eurozone cause the euro to function as the gold standard. The US economy performs better in some respects, partly because of the advantages of fiat money. The treaty on the EMU has to be adapted in order not to become dependent upon current ad hoc measures, with the loss of welfare over the years 2008-2013+. If Eurozone nations create their own national Economic Supreme Courts, then an optimal currency area can still come about without transfer to Brussels of national sovereignty on the budget. When consumers and agents can have deposits at a local branch of the European Central Bank, a system of deposit insurance has been established by itself. Advisable is a split-up between (1) the primary payment system with retail banks that are franchises of the ECB, (2) the secundary savings and loans banks, and (3) the tertiary investment banks. The shadow banking system must be redressed, with every financial transaction having an identified regulation. Conforming to an earlier proposal the ECB can create funds to redress debt. Notably, 400 billion euro can be created and invested in bank capital, and be directly neutralised by the capital requirement of 10.5%. Another 400 billion can be used to clean up the debt of Greece and Italy. Their participation in the Eurozone was a political decision and thus the Eurozone must bear the consequences. To satisfy the no-bailout-condition, Greece and Italy could create economic zones comparable to the lease of Hong Kong, where companies could invest and operate under international law for the next 40 years.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45759.

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Date of creation: 02 Apr 2013
Date of revision: 02 Apr 2013
Handle: RePEc:pra:mprapa:45759

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Keywords: Economic stability; monetary policy; economic crisis; euro; European Central Bank; bank capital; risk free rate; fiscal policy; tax; external balance; Economic Supreme Court; optimal currency area; investment; investment banks; Banking Union;

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  1. Stephen Pollock & Nikoletta Lekka, 2004. "Deconstructing The Consumption Function: New Tools And Old Problems," Royal Economic Society Annual Conference 2004 104, Royal Economic Society.
  2. Colignatus, Thomas, 2011. "High Noon at the EU corral. An economic plan for Europe, September 2011," MPRA Paper 33476, University Library of Munich, Germany, revised 19 May 2010.
  3. Stephen Pollock & Nikoletta Lekka, 2001. "Deconstructing the Consumption Function: New Tools and Old Problems," Working Papers 448, Queen Mary, University of London, School of Economics and Finance.
  4. Thomas Colignatus, 2005. "A better way to account for fiat money at the Central Bank," General Economics and Teaching 0512014, EconWPA.
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