The EU executive in Brussels does not accept electoral primacy. It shares with Marxist communism a belief in statist primacy instead. The only difference between the two creeds is Marx planned to rule the world, while Brussels is on the way to ruling Europe.
The methods of satisfying their objectives differ. Marx advocated civil war on a global scale to destroy capitalism and the bourgeoisie, while Brussels has progressively taken on powers that marginalise national parliaments. Both creeds share a belief in an all-powerful executive. The comparison with Marxism does not flatter the EU, and suggests it has a limited life and that we may be on the verge of seeing the EU beginning to disintegrate. Despite economic evolution in the rest of the world, like Marxian communists Brussels is stuck with a failing economic and political creed.
It has no mechanism for compromise or adaptation. A rebellion from Greece was put down, the British voted for Brexit, which is proving impossible to negotiate, and now Italy thinks it can partially escape from this statist version of Hotel California. The Italians are making huge mistakes. The rebel parties forming a coalition government want to stay in the EU but are looking to exit from the euro. Putting aside the impossibility of change for a moment, they have it the wrong way around. If they are to achieve anything, they should be exiting the EU and staying in the euro. Let me explain, starting with the politics, before considering the economics.
As stated above, the EU is quasi-Marxist, placing the state above the people. The Italian government has collaborated with Brussels to enslave its own people as vassals of the EU super-state. If there is a revolt in Italy, this is what the electorate is rebelling against. Faceless eurocrats tell the Italian people what to do and what to think. The people are discontent with both the super-state and their own weak governments.
The two parties forming the latest coalition are too frightened to blame the EU, and instead propose to beg for debt forgiveness and say they are considering leaving the euro. But without a clear vision, and understanding why the Italian electorate is discontent, this coalition will turn out, in one of Boris Johnson’s memorable phrases, to be comprised of little more than supine protoplasmic invertebrate jellies. Greece is the precedent. This makes it easy for the EU to deal with the Italians. They will get nothing.
The economic argument, that Italy would be better with her own currency, is insane. With a history of weak irresponsible governments, it is far better for the currency to be beyond Italy’s control. However, Keynesian commentators are sympathetic to the weak currency argument, believing that the euro was constructed for the benefit of Germany. Italy, along with the other Mediterranean members, is said to be paying the price. This, they allege, is the fatal flaw in the one-size-fits-all euro. This interpretation of the monetary situation is baloney. It ignores the fact that Italy’s debt rocketed after the formation of the euro, because the cost of borrowing for Italy fell towards Germany’s borrowing rates, thanks to the guarantee of eventual unification. The difference was Germany borrowed to invest in production, while the Italian government borrowed to spend. The problem today is the profligacy of the past has caught up with Italy, and its government must stop borrowing.
Setting up a lira alternative, or the mooted mini-BOTs, is an ill thought out concept that only makes matters worse. The mini-BOT proposal appears to be for an issue of certificates backed by future tax revenues to be used to pay the government’s creditors. They would then circulate like bills drawn on the state, but at a discount to reflect both their time value and the fact they are not euros. It seems to not occur to the promoters of schemes like this that the state’s creditors will insist on payment in euros.
Promoters of schemes like mini-BOTs are monetary cranks, incentivised by a desire to avoid reality. The Italian government has been using this sort of hocus-pocus for years, mostly with securitisation of future income streams, such as the national lottery. Mini-BOTs appear to be a proposal for just one more throw of the dice.
It’s hardly surprising that the Italian people are fed up with their establishment and feel they can only collectively undermine it by voting against it at election time. But it is too late, because the state, and therefore the banks, are already irretrievably bust, a fact barely concealed by the ECB’s funding of the Italian government at near-zero interest rates through the purchase of government bonds. Not only is the ECB in denial over Italy’s financial situation, but also Italy is firmly imprisoned.
- Source, James Turks Goldmoney
