1. Prologue

Europe is fragmenting. While in the past year the European Central Bank has managed to stabilise the bond markets, the economies of the European core and its periphery are drifting apart. As this happens, human costs mount and disintegration becomes an increasing threat.

It is not just a matter for the Eurozone. The fallout from a Eurozone breakup would destroy the European Union, except perhaps in name. And Europe’s fragmentation poses a global danger.

Following a sequence of errors and avoidable delays Europe’s leadership remains in denial about the nature of the crisis, and continues to pose the false choice between draconian austerity and a federal Europe.     

By contrast, we propose immediate solutions, feasible within current European law and treaties.

There are in this crisis four sub-crises: a banking crisis, a public debt crisis, a crisis of under-investment, and now a social crisis – the result of five years of policy failure. Our Modest Proposal therefore now has four elements. They deploy existing institutions and require none of the moves that many Europeans oppose, such as national guarantees or fiscal transfers. Nor do they require treaty changes, which many electorates anyway could reject. Thus we propose a European New Deal which, like its American forebear would lead to progress within months, yet through measures that fall entirely within the constitutional framework to which European governments have already agreed.

Read Section 2: The Nature of the Euro Crisis

One thought on “1. Prologue

  1. Re the nature of money, I was reading an article by Smriti Chand Money


    1. Primary Functions:

    The two primary functions of money are to act as a medium of exchange and as a unit of value.

    (i) Money as a Medium of Exchange:

    This is the primary function of money because it is out of this function that its other functions developed. By serving as a medium of exchange, money removes the need for double coincidence of wants and the inconveniences and difficulties associated with barter. The introduction of money as a medium of exchange decomposes the single transaction of barter into separate transactions of sale and purchase thereby eliminating the double coincidence of wants.

    This function of money also separates the transactions in time and place because the sellers and buyers of a commodity are not required to perform the transactions at the same time and place. This is because the seller of a commodity buys some money and money, in turn, buys the commodity over time and place.

    (ii) Money as Unit of Value:

    The second primary function of money is to act as a unit of value. Under barter one would have to resort to some standard of measurement, such as a length of string or a piece of wood. Since one would have to use a standard to measure the length or height of any object, it is only sensible that one particular standard should be accepted as the standard. Money is the standard for measuring value just as the yard or metre is the standard for measuring length.

    The monetary unit measures and expresses the values of all goods and services. In fact, the monetary unit expresses the value of each good or service in terms of price. Money is the common denominator which determines the rate of exchange between goods and services which are priced in terms of the monetary unit. There can be no pricing process without a measure of value.

    So, from the above, am I right in thinking that true value exists in the human effort to transform materials, plant crops, rear animals, extract ore, seek out rare objects etc?

    And that this value can be represented by any monetary unit issued by a competent and trusted authority?

    If so, does it not follow that a country can, if it wished, issue a domestic currency (eg drachmas) to public servants or to purchase goods within its borders?

    And that currency might be pegged to an external currency (eg euros) which can then be used for external transactions?

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