Case for a European greenback - Rodolfo Ragonesi
When war broke out with the South that attempted to break away from the Union, US President Abraham Lincoln got Congress to pass the 1862 Legal Tender Act to issue a second generation greenback, US notes, to the tune of $150 million. The new issue of dollars that did not bear interests from any bank, and that did not have to be paid back to anyone, financed the expensive war. The banks had wanted to charge the nation 24 to 36 per cent interests. The President told them to get lost and Congress reclaimed its constitutional right to issue money.
When Napoleon sought to raise money to finance his military campaigns, he did not relish the thought of becoming indebted to the banks who would thus hold the real power and keep him and France on a chocker hold. He decided to raise money by selling France’s vast colonies in the Americas stretching from the Great Lakes all the way down to the Gulf of Mexico. This was called the Louisiana Purchase, a sale of territory far more extensive than the southern state that today bears the old French king’s name. He relinquished over twice the size of the territory making up the states that had broken away from Britain.
Has the time come for Europe to seriously consider launching its own form of greenback?
The proposal here is that the European Union authorises a radically different form of quantitative easing (QE) by issuing special euros, that we can here call the Green Euro, backed by the European Commission, that would not bear interests paid to any bank or other bond holder, or have to be repaid. These would be used specifically to finance a green revolution based upon the massive production of renewable energy. It could go something like this.
The EU authorises the issue of, say, two trillion non-interest bearing Green Euros that would go to subsidise the large increase in renewable energy infrastructure across the EU. This could produce, with a very rough ball park figure, around 10 million megawatt hours of electricity per day. The funds would be allocated to member states in proportion to their populations, injecting money into all the economies to the tune of around €4,000 per capita. One trillion euros would be available to citizens, the other trillion to industry and commerce. All would be invited to apply for clean energy subsidies.
If the amount is over-subscribed, the funds would be allocated by the respective nations on a means-tested basis, to support the less well off citizens and companies. Citizens who have no space to install energy systems would be offered shares in communal systems set up in their regions. Priority should be given to the use of equipment manufactured within the EU.
This would cause a huge trickle down as well as a multiplier effect within the EU economic zone, giving a boost to citizens, commerce and the renewable energy sector, while moving at the same time to greatly surpass the 2020 targets of clean energy production.
It would also reduce the EU’s reliance on imported petrochemicals and therefore improve its trade balance. All this would give a much needed boost to the EU economy while ignoring the pitfalls of previous injections of funds, the said euphemistically called QE, which so often filtered up to the top, making the financial institutions even richer, while having little effect on the economy, and which came with a substantial cost by way of interests paid to bond holders.
The EU injected €2.4 trillion since 2015 through a huge bond buying, interest bearing programme which ECB president Mario Draghi has said will be wound down this year.
The global financially engineered structure is under tremendous strain. If it is not very seriously reformed, just like the bridge in Genoa, it will just collapse
Another problem with Europe’s QE programme is that it was not directed where the economy needed it most. It was like injecting cortisone generally into the body and hoping that it would somehow find its way where needed, rather than injecting it directly into a specific joint.
Injecting more currency has always been done, long before QE came into fashion. It has simply gone by another name, fractional reserve banking, which has allowed the banking community to create nine times more money, out of nothing, than it has assets and deposits, but again by charging interests on money it was allowed to create out of nothing. The creation of swaps and derivatives increased this even more.
President Lincoln was faced with a crisis and took draconian action by getting Congress to authorise the issue of the US notes still referred to as greenbacks. Today, Europe too is facing a crisis, and the QE measures as applied did not obtain the desired effects. We need to think out of the box, or laterally as compatriot Edward Debono put it.
The European economy needs a huge shot in the arm in a more intelligent manner. Wealth needs to actually trickle down more than it did through QE. European manufacturing needs to grow stronger in the face of growing competition, and reducing energy bills goes a long way to doing that.
Climate change connected to hydrocarbon use is fast reaching a cataclysmic positive feedback loop. The massive boost in the clean energy production sector would be equivalent to President Roosevelt’s New Deal that saw the US economy start to bounce back after the Great Depression.
It is about time European citizens awoke to the real issues and lobbied very strongly with their representatives to take decisive action. Sometimes it feels like many representatives spend more time in the pockets of the financial elite than in their respective cabinet rooms and houses of parliament. They need to wake up too; to the realisation that it is sovereign nations, and now in the eurozone, the EU as a collective, that have always had the power to issue money, without being endlessly indebted to the banks and having to pay interests on bonds.
Europe needs a lifeline, and if the financial elite has been handed the sole supply of lifebelts on a silver platter, and releases them only at the price of endless interests, then our leaders need to do the right thing and reclaim the financial sovereignty they hold as representatives of the sovereign people. Our leaders have never had a mandate to abdicate such sovereign powers to the unelected financial elite, who pursue their own policies for profit, keeping the whole world saddled with a debt that quite obviously can and never will be repaid.
The money changers today have set up shop on every street corner, and the whole world and his aunt, from nation to corporation to citizen, is caught in the dragnet of financial bondage we call debt. The global national debt stands at a ludicrous $73 trillion, and that is just public, excluding all private debt. That pans out at an average $10,000 per man, woman and child living on the planet.
The global financially engineered structure is under tremendous strain. If it is not very seriously reformed, just like the bridge in Genoa, it will just collapse.
If we do not take this wild bull, traditionally representing perceived financial growth, by the horns, it is going to turn around and use those same horns to impale us all.
Rodolfo Ragonesi is a lawyer and researcher in history and international affairs.