As the IMF says future of the euro currency and the entire EU project looks unsustainable without major changes, it is time to switch the currency over to sovereign money, something which can be done by changing one article, namely article 123 of the Treaty on the Functioning of the EU.
Uli Pfauntsch notes an interest rate of just 1 or 2% could lead to the collapse of the Eurozone.
He argues theEuropean Central Bank will soon be torn between the task of stopping a collapse of massively indebted countries as well as the banking system in Europe (using historic negative interest rates) and the need to tackle inflation (requiring high interest rates).
Italian banks are the immediate risk of the eurozone with European officials apparently obstructing a plan to save the country’s €4tn banking industry with a bailout.
In fact, saving Italy’s banks from insolvency requires nothing more than a change in the fractional reserve requirement rules and ECB liquidity rules.
New emergency stop gap rules could, for example, state that a bank can continue to obtain liquidity even if it has negative reserves or the bank can be allowed to enter “nominal” capital onto its books by some accounting sleight of hand.
Italian banks have €360bn of bad loans on their books, of which €200bn are deemed insolvent and could collapse very soon, triggering a wave of bank crashes throughout Europe.
As the eurozone lurches towards financial collapse and social upheaval, we urgently need the Chicago Plan Revisted to be implemented.
The current system of money creation in the eurozone by private banks is not only destablizing and inflationary, it is also unconstitutional and unlawful. Nowhere in any treaty does it say that private banks can have a monopoly on the creation of money.
Sovereign money is banned in the EU through a backdoor technical article.
The so-called prohibition of monetary financing is based on article 123 of the Treaty on the Functioning of the EU.
“Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.”
As Ambrose Evans Pritchard reports in The Telegraph.
One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.
The conjuring trick is to replace our system of private bank-created money — roughly 97pc of the money supply — with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.
Specifically, it means an assault on “fractional reserve banking”. If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.
The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.