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Monetary Unions – How Fast Can They Collapse?
QUESTION: Mr. Armstrong; Nobody seems to be able to answer this question. How fast would the Euro disintegrate if the EU appears to be on the verge of collapsing assuming Britain were to leave? There is a consensus that other states would then begin to also prepare referendums to leave. This question become paramount and you may be the only person with such a database to offer guidance other than just personal opinion.
Thank you for your consideration
KW
ANSWER: Our number one objective has always been to define time. The very reason we reconstructed the world monetary system, bought coins from around the world, and created the largest collection of Roman coins ever assembled was to answer the question – How fast did Rome fall? Was the collapse gradual like a 747 coming in for landing, or was it rapid like a waterfall? The answer that emerged we called the Waterfall Effect. You can see from the chart presented that the collapse took just 8.6 years out of one thousand. The decline and fall monetarily was extremely rapid once Valerian I was captured by the Persians in 260 AD, and his son Gallienus was finally killed in 268AD.
Skeptics who simply refuse to believe anything try to claim history was irrelevant because it was long ago and this time it is different. Every fool who buys government debt convinces themselves that this time is different and government will never end. Well, the Bretton Woods fixed monetary system came under pressure and collapsed in August 1971. When did the pressure begin? Hm. Well, it was about 8.6 years prior when Kennedy agreed to end silver in the coinage. That was 1963 and the last coin to be produced in silver was 1964.
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Failed Discipline, Failed Reforms and Grexit: Why the Euro Failed
Failed Discipline, Failed Reforms and Grexit: Why the Euro Failed
There is no substitute for the discipline of a market that cannot be manipulated by political elites.
It’s not that difficult to understand why the euro is doomed to fail. Given its structure, there is no other possible outcome but failure. Greece’s exit (Grexit) will simply be the first manifestation of the inevitable structural failure of the euro.
To understand why this is so, we have to start with two forms of discipline: the market and the state.The market disciplines its participants by discovering the price of not just goods and services but of currencies and the potential risks generated by fiscal and trade imbalances.
When nations issue their own sovereign currencies, the global foreign exchange (FX) market enforces an iron discipline on all participants. If a nation prints excessive quantities of its currency without boosting its production of goods and services by an equivalent amount, the FX market punishes this nation by devaluing its currency.
The market provides unwelcome feedback to the imbalances of interest rates, credit and currency: imports become prohibitive, nobody wants to buy the nation’s bonds unless the interest rate compensates for the higher risk, and so on.
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Keeping Greece in the eurozone is worth the pain: Don Pittis
Keeping Greece in the eurozone is worth the pain: Don Pittis
To misquote Mao Zedong, creating a single currency is not a tea party. Despite former U.S. central banker Alan Greenspan’s disparaging comments about the future of the euro, Americans had far worse problems creating a single currency.
The question facing the Europeans as they hammer out a deal with Greece is whether the long-term advantages of the euro outweigh the pain of the current ructions. If the American experience is any guide, it is worth it.
Greenspan has been widely quoted as predicting the collapse of the eurozone, led by the forced exit of Greece. In the interview on the BBC, however, Greenspan did not specifically link the two, as in cause and effect.
But he did say that, in the long term, the European currency union is untenable.
“There is no way I can conceive of the euro continuing unless and until all of the members of the eurozone become politically integrated,” Greenspan told the BBC’s Mark Mardell.
What Greenspan conveniently seemed to forget is that for Americans (and even Canadians), settling on a single unit of payment was a long and painful process. It costs money. And if U.S. history is any guide, it does not depend on perfect political integration.
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