Why Britain needs the euro – Sep 6th

Libertarians are known for enjoying a good debate, and rumours abound that we are also partial to hot headed arguments. I am hoping that this last generalistion turns out to be unjustified on September 6th because I think that this month’s speaker at the Rose and Crown will edge Harry Aldridges’ UKIP sales pitch as perhaps the most contentious subject to take on. Come to think of it, Mr Aldridge left looking reasonably happy, so perhaps we’ll be okay.

I will let the speaker, Chistian Michel, give you a taster of his argument. Christian thinks that Britain, rather than avoiding the doomed authoritarian political project, should actually join the euro, and do so with the active support of libertarians:

I start from the following propositions, which I think libertarians will not disagree with:

The greater the number of economic agents using the same currency, the better that currency can serve its purpose as means of payment; national currencies are obsolete

The greater the independence of a bank of issue, the more reliably its currency can be used as a store of value

The euro has the potential to satisfy these two requirements. It is issued by a central bank, which does not derive its legitimacy from any national sovereignty, and that is its virtue.

Never let it be said that I am closed to opinions I oppose!

Christian, I am assured, is a bona fides libertarian who has consistently advocated for economic liberty consistently for many years and has earnt the respect of the community. He also has considerable economic expertise from running his own financial business out of Geneva. He is the author of books and papers published by the Institut Economique de Paris and Hampden Press, notably La Liberté, deux ou trois choses que je sais d’elle; Vivre Ensemble; Bricks of Freedom; The Class Struggle Is Not Over

Christian is away and does not know it, but his talk will need to begin a little later than usual to make way for a round of announcements, but please be there at 8pm to get the full benefit of the evening’s formal session. As ever, the informal bit officially starts from 7pm, though regulars often arrive earlier at their convenience. Lately, we have been in the beer garden for the start of the evening but we will see. The talk will happen upstairs in the function room, accessed from behind the bar.

A map, and the option to RSVP (which I like) is available on meetup.com.

Tags:

Currency, Economics, Euro

Date:

August 23, 2012

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Before:

10 responses to “Why Britain needs the euro – Sep 6th”

Paul Marks

August 23, 2012 at 10:35 pm

Christian Michel’s error is made clear in his second principle – and it is a double error.

Firstly a currency should not be from a “bank of issue”.

A currency (as Carl Menger pointed out) is (or should be) a COMMODITY (such as gold or silver) – a commodity desired by buyers and sellers, only in this way can it be a true “store of value”.

But even if a currency is a fiat (government edict) one rather than a commodity – why shoul da “bank” be involved.

If a government wishes to have a fiat currency (whose only value is that created by legal tender laws and tax demands) then there is still no need for a Central Bank or for “pet” private banks. Government supported banking (via a Central Bank) just adds a lawyer of CORRUPTION to a fiat currency, it makes it WORSE (not better). If a government insists on a fiat currency it should certainly NOT be “issued by a bank”.

And the European Central Bank has shown itself to be anything but “independent” – on the contrary it has created trillions of Euros in response to POLITICAL PRESSURE.

If there must be government fiat currencies then there should be AS MANY AS POSSIBLE (so that they may compete against each other).

In short the EXACT OPPOSITE of Chrisian Michel’s position.

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Tim Carpenter

August 28, 2012 at 4:59 pm

If you issue a currency, one would think at some point people would borrow and lend it.

For borrowers to find lenders and lenders to find borrowers, one tends to make use of intermediaries and markets.

Very soon an issuer of currency will find entities becoming intermediaries in the lending and borrowing business of its currency.

The issuer will want to ensure those entities are not playing fast and loose with fractional reserve behaviours – on-lending naturally leads to FRB, especially now we have electronic payments and other means to bypass physical scrip.

If an issuer of currency does not become or is not already a bank, it will rapidly find itself if not in the banking business, then the Central Bank business for its currency.

I am not saying this is good or bad, but just a natural consequence of issuing currency.

I think it would be a great way to bypass bank cartels, to just issue the currency and not be a bank, only license existing banks to conduct their business in your scrip.

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1. Paul Marks.
  
  August 29, 2012 at 12:20 pm
  
  I do not agree Tim.
  
  After all the state (or a private issuer of currency) can ask to be paid in its own stuff.
  
  President Martin Van Buren (himself an ex banker – and a leading banker) refused to put Federal tax money in banks (neither a “National Bank” or “pet” State level banks – as Andrew Jackson had done).
  
  And Senator “Bullion” Benton insisted that public lands be paid for in gold.
  
  “Well that is fair enough – I take my bank notes that represent gold and …..”
  
  No – PHYSICAL gold.
  
  Banks can do what they like – but the Federal government does not to accept payment of taxes (and so on) in their drafts and …….
  
  After all PRIVATE enterprises regularly “discounted” bank notes (and drafts and ….) before the Civil War.
  
  They did NOT accept this bank stuff at face value (thus rather putting a damper on Fractional Reserve activities).
  
  This was not stopped by a “changeing society” a “more complex modern economy” or other such.
  
  It was made ILLEGAL – by the National Banking Acts.
  
  Special banks (the mainly New York Banks who were given a special position) could issue drafts and other such – and it was made ILLEGAL for private indivduals and enterprises to discount it.
  
  Useing regulations (“laws”) as a form of corporate welfare.
  
  This (and such things as allowing the “suspension of cash payments”) is what is at the heart of the out of control grouth of fractional reserve activities.
  
  As for trying to control FRB by a Central Bank.
  
  On the contrary – FRB credit bubble finance is made WORSE by Central Banking.
  
  The bubbles after 1913 were (as you know) worse than the bubbles before 1913.
  
  Government regulations are not about limiting credit-money expansion (credit-money BUBBLES).
  
  Government regulations (and Central Bank antics) have very different objectives.
  
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Tim Carpenter

August 29, 2012 at 4:09 pm

Paul,

Where do I say anything about state enforcing tender laws?

I also do not say a central bank in a monopoly currency environment, but aspects of behaviour in regards to its own currency.

If a currency is used by banks to lend, at some point there will exist the need for clearing and settlement. Of course an issuer could sit back and let anyone do that, or compete themselves.

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1. Paul Marks,
  
  August 29, 2012 at 4:45 pm
  
  Tim – you indeed do NOT mention legal tender laws.
  
  In my reply to you I DID NOT MENTION THEM EITHER.
  
  I never said that a government should forbid people treating bottle tops and and roses as money for the settleing of private debts (if they wish to do so).
  
  All I mentioned was the historical example of how government issueing money does NOT automatically mean that govenrment has to act as banker.
  
  “Clearing and settlement” should be none of the government’s business.
  
  If the currency is gold – then people should pay their taxes in gold (PHYSICAL gold). It can be done by electronic transfer of owership – they do not havt to a sack of gold to the Treasury every year (although, come to think of it, it might concentrate the minds of the taxpayers if they DID have to do that – make them demand that taxes were lower ….).
  
  And if the currency is fiat notes – then it should be the same thing.
  
  The PHYSICAL notes should be what taxes are paid in.
  
  Again – if need be by the electronic transfer of ownership of the PHYSICAL notes.
  
  Bottom line?
  
  There should be no gap between the “Monetary Base” and “Broad Money”.
  
  Or, if there is a gap (a bubble), then that is down to the private banks.
  
  If they run into trouble beause of such a bubble – oh dear. how sad, never mind.
  
  No “suspension of cash payments” and if a bank can not meet its committments (in cash) then it goes bankrupt. Not my fault (or you fault) if a bank can not meet its contractual obligations. Perhaps it should not have given such contratual committments.
  
  I think we agree.
  
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Tim Carpenter

August 29, 2012 at 10:56 pm

Paul, I never mentioned a government should act as banker either, just that if an entity creates a form of money, that it, IMHO, will eventually move to want to have oversight of how it is on-lent “central banking” as opposed to Central Bank.

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1. Paul Marks
  
  August 30, 2012 at 8:04 am
  
  I think we (or at least ME) are in a fog here Tim.
  
  What specifically do you mean by “oversight”?
  
  I feel the red mist comming down because when (for example) Bill O’Reilly uses the word “oversight” he means (as nearly everyone does) even more (utterly useless or counter productive) government regulations.
  
  However, it is very unlikely that you mean this by the word “oversight” (as you are not a Long Island man with a 1950s view of what the Federal government is like – honest, out to “protect the folks” and so on) so treat me as the (more than slightly) punch drunk middle aged man that I am – and lead me through what you mean (stage by stage, very specific, idiot guide style).
  
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  1. Tim Carpenter
    
    September 2, 2012 at 5:41 am
    
    No government.
    
    Oversight by the creator of the currency on what lenders and deposit-holders say they have and are doing with it.
    
    Expecting such entities to have physical specie in their vaults, per branch, to account for each deposit and promise is impractical, not least because at some point one needs to settle with counterparties and trucks rumbling through the night to transfer hard currency is unlikely.
    
    So oversight would be needed to ensure banks where honest in what balances, loans etc they managed to prevent inflating the supply of that currency beyond the reserves lodged centrally. Centrally held reserves enable rapid inter-bank settlement, as you know.
    
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  2. Paul Marks
    
    September 2, 2012 at 4:33 pm
    
    Inspite of being at work from 0530 this morning (and, before that, getting myself into yet another internet feud with the unspeakable ones) , I think I start to see what you mean.
    
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Thursday drinks update | Libertarian Home

September 4, 2012 at 6:00 am

[…] will be coming out in favour of the euro on a variety of grounds which he says are founded on the bedrock of libertarian […]

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Why Britain needs the euro – Sep 6th

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10 responses to “Why Britain needs the euro – Sep 6th”

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