EU Ambassador to the US: Euro Crisis to Be Exploited to Further Fiscal and Political Integration

The European Union's ambassador to the United States, Mr. Joao Vale de Almeida, addressed a large and polite audience today at the University of Iowa's School of Law. In a prepared address he traced the origins of today's EU back to the post-war European Coal and Steel Community, an attempt to prevent another devastating European war by making the French and German economies dependent upon one another for the two key commodities of modern war at that time. The Coal and Steel Community has grown into today's EU of 27 nations. Seventeen of those nations share a common currency, the euro.

Mr. Vale de Almeida is rightfully proud of the EU's major accomplishment of ensuring a peaceful Europe through economic integration. Today's EU guarantees the right to the free flow of goods, services, capital, and people within its borders. This is an achievement that would meet the approval of any Austrian School economist, including this writer. Furthermore, most friends of Europe believe that Mr. Vale de Almeida is right to say that it is this liberal economic policy that is largely to be credited with the belief that another European war is unthinkable. So, what did Mr. Vale de Almeida say that threatens that accomplishment?

Today Europe is in the midst of a very serious economic crisis which threatens the future of the EU itself. What changed to bring about this potentially catastrophic development? Well, Mr. Vale de Almeida told us in unequivocal words--the desire of a European elite for political integration, using the euro crisis as the vehicle.

Mr. Vale de Almeida stated that economic integration had ensured that the errors of one nation could infect all others in the bloc. But this was not possible until 17 of those nations used a common currency, the euro. A nation that uses its own, national currency cannot cause inflation in its trading partners; it can cause inflation only in its own monopolized currency zone. But now all 17 nations can transmit inflation to all other countries in the euro zone via their roundabout ability to monetize their national debts via euro printing. All 27 nations in the EU, even those such as the UK which are not using the euro, are being coerced into bailing out those nations who have used euro printing to accumulate unsustainable sovereign debt. All Europe is at odds over this proposal.

Mr. Vale de Almeida informed his audience that the EU is moving further into political unification, having recently formed the External Action Service, a kind of super foreign ministry that purports to speak for all of Europe. He claims that the EU nations already hold common foreign policy positions on 90% of the issues. No doubt this is true. But it is the other 10% that causes all the trouble, which the recent unrest in North Africa made clear after the Schengen Agreement, that guarantees the free flow of people within Europe, came under attack after Italy allowed free entry to thousands of North African refugees.

But it is the euro that may rip the EU apart. As Dr. Philipp Bagus made crystal clear in his definitive book on the subject The Tragedy of the Euro, the euro was "misconstructed" by allowing the still existing national banks to print euros in a roundabout manner. Thus, there is a great incentive for national governments to run high budget deficits. One may imagine the consequences of having multiple counterfeiters all trying to print money and spend it as fast as possible before other the counterfeiters do the same.

Mr. Vale de Almeida admitted that his colleagues will use the consequences of this fundamental monetary misconstruction to panic the citizens of Europe into ratifying a new constitution that would merge the disparate nations into a fiscal and political union. He claims that such an outcome is the ONLY solution to the crisis, quoting German Chancellor Angela Merkel as saying that "If the euro fails, Europe fails." Really? We American Euro skeptics join our European brothers in categorically denying this absurd assertion. Europe had accomplished all that it needed to accomplish when it formed a large free trade zone that included the free flow of people and capital in addition to that of goods and services. THIS was Europe's great accomplishment, which the Euro elite now threaten to undo. The true "Tragedy of the Euro" is that it will become the mechanism that leads to a "tragedy for Europe", for all that has been accomplished by more astute statesmen over the post war decades is about to be undone by those of lesser intellect and greater lust for power and aggrandizement.

My letter to the NY Times re: The Unnecessary Drive for Energy Independence

From: patrickbarron@msn.com
To: letters@nytimes.com
Subject: The Unnecessary Drive for Energy Independence
Date: Sun, 25 Mar 2012 18:59:10 -0400

Re: U.S. Inches Toward Goal of Energy Independence
Dear Sirs:
The fact that the U.S. is producing more energy of many kinds--oil, natural gas, etc.--should be of academic interest only. Seeking autarky in energy should not be a public policy. Like any other economic good, energy should be obtained from those who possess a comparative advantage in the marketplace. Furthermore, it is assumed that the world will be a more peaceful place should the U.S. achieve this goal, which, as your authors state, was first articulated by President Richard Nixon. However, the historical evidence fails to support the contention that autarkic states are more peaceful. Quite the contrary, as is evident from Nazi Germany to Communist North Korea. Cooperative nations engage in trade for the betterment of all parties involved. Autarkic nations are belligerent nations, forever seeking to control politically via war what they refuse to buy in honest and peaceful trade.

Patrick Barron

My letter to the Financial Times re: The Aussie's strength is not the problem

From: patrickbarron@msn.com
To: letters.editor@ft.com
Subject: The Aussie's strength is not the problem
Date: Fri, 23 Mar 2012 18:26:41 -0400

Re: Boom in mineral wealth exploitation fails to mask Austrialia's problems

Dear Sirs:
Your sub headline about Australia's struggling mineral sector erroneously places the blame on the country's strong currency and the desire of its citizens to save. Currency exchange rates are determined by purchasing power parity. If the "Aussie" were weaker, then production factor prices would be higher, negating any temporary benefit for export industries. Furthermore, there is no basis for the discredited "paradox of savings" theory that lays the blame for a country's economic ailments on the consumers' desire to save. Savings is the necessary building block of capital formation, which increases worker productivity and leads to a higher standard of living. The accompanying chart showing the "Aussie's" rise against the US dollar since 2001 is an indictment of the Fed and not of the Australian central bank.

Patrick Barron

My letter to the Financial Times re: Regulatory Hubris

From: patrickbarron@msn.com
To: letters.editor@ft.com
Subject: Regulatory Hubris
Date: Thu, 15 Mar 2012 06:20:31 -0400



Re: Shadow banking "threatens stability"
Dear Sirs:
In his recent address to the Cass Business School in London, Lord Turner advances the preposterous claim that his army of regulators have the ability to decide what is and what is not a safe and sound investment. This is the height of hubris borne of a complete lack of understanding of financial markets. No one knows what is a safe and sound investment. This is determined ONLY by the market discovery process, which works ONLY when the participants have their own property and livelihoods at risk. Those investors and their advisors who are successful become wealthy, because they have added to the wealth of society through their insight. They are rewarded with more assets to manage and control. Those investors and their advisors who squander wealth will not be entrusted with more. Regulators risk neither their own wealth or their professional livelihoods and, thusly, are not subject to the discipline of the market. Thusly, they CANNOT engage in the kind of disciplined calculation that is necessary for markets to flourish.

Patrick Barron

My letter to the NY Times re: Private Purchasing Power Remaining

From: patrickbarron@msn.com
To: letters@nytimes.com
Subject: Private Purchasing Power Remaining
Date: Tue, 6 Mar 2012 09:47:42 -0500

Re: States of Depression, by Paul Krugman

Dear Sirs:
Paul Krugman's recent Op Ed "States of Depression" perfectly illustrates the Keynesian view that "lack of demand" is what ails the U.S. economy and, if private individuals will not throw their hard earned dollars at questionable projects in their attempt to rebuild the capital base plundered by government, then the states must do it for them. An alternative view is that of Murray N. Rothbard as first explained in America's Great Depression. Only the private economy produces capital, upon which rests the productive capacity of the nation. All government spending consumes capital or restricts its formation. Rothbard called the wealth generating sector of the economy "Private Purchasing Power Remaining" (PPPR). Krugman himself admits that massive government spending has done little to help the nation out of its crisis. Perhaps it is time to give Rothbard's solution a chance. It worked in 1920/21 in curing the "Great Depression that nobody knows".

Sincerely,

Patrick Barron

My letter to the NY Times re: Europe's Austerity Mirage

Re: Europe's Austerity Mirage by Jean-Paul Fitoussi

Dear Sirs:
Professor Fitoussi gives an excellent explanation of the dilemma facing Greece (and others, of course), but his prescription would fail because he misunderstands the cause of the crisis. The problem is NOT that the euro is a "common currency without a sovereign", so his prescription of asking the ECB to issue eurobonds will do nothing to effect the real changes needed. Eurobonds would cause moral hazard and merely forestall necessary adjustments. Furthermore the professor is wrong to categorize as "austerity" measures such as reducing the size of the predatory government class, selling state assets (that the state should never have owned and controlled in the first place), and reducing the regulatory burden. These measures would liberate the wealth producing class and allow the Greeks to accumulate capital instead of allowing the welfare state to consume it. Professor Fitoussi is correct that Greece does not control the euro and cannot depreciate. Therefore, its only options are to remain on the euro and accept the pain and possible civil unrest that comes with massive price deflation or return to a depreciated drachma and default on its euro-denominated debts. There are no other options that are acceptable to the rest of the eurozone countries, who know that Greece just cannot pay its current euro debt and will not throw good money after bad.

Patrick Barron