Munich Personal RePEc Archive

Money as gold versus money as water

Colignatus, Thomas (2013): Money as gold versus money as water.

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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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