The TARGET2 Chart Shows A Breakdown Of The Central Bank Narrative
By Tyler Durden
Submitted by Eugen von Bohm-Bawerk via Bawerk.net,
Money, generally accepted medium of exchange, acts as a veil that confuse and blurs economic relations. This is especially true when it comes to intertemporal considerations. Whilst probably the most important institution in a free market, money can be highly destructive when politicized. Why? Because politics is about power and distribution of real wealth. And since money affect almost every single transaction, politics can span throughout society with ease when in control of money. Amchel Rothschild was spot on when he allegedly said “[g]ive me control of a nation’s money supply, and I care not who makes its laws.” Power over money is power over people and power over people is, well, pure power. Money is thus the most sacred tool in a statist’s toolbox and has become instrumental in their quest to control society and allocate resources as they see fit.
It is within this context the monstrosity called the euro need to be analyzed. By pooling Western European countries within the realm of one central bank, power over people increases immensely. There is a catch though; as power increases, greed and corruption increases with it and the temptation to go too far is obvious for all to see.
Money coordinates production with consumption, saving with investment and properly done, money will create the means for a smooth flow of resources among the millions or even billions of people transacting with each other. Politicize money and economic imbalances, between economic agents and even over time, will grow and destabilize the system. It is no exaggeration to say that the welfare and prosperity of the populace depends on a well-functioning monetary system.
The most important function money has, in our view, is its ability to create recessions, or as we like to call it, disruptions of unsustainable resource flows. In a sound system, money will make sure recession occur before the imbalance will even be felt by the broader public. Sound money will remove tensions in fault lines before they turn into a massive earthquake with devastating consequences. However, it is true that economic imbalances can be fed for years if sound money is replaced with a politicized fiduciary medium. And herein lies the crux of the problem, no power hungry politician will voluntarily end the economic prosperity a boom apparently foster. Therefore, they feed it with money created ex nihilo instead; chipping away trust and letting the bubble grow larger and larger. As imbalances becomes ever more entrenched in the economic system, the mere thought of terminating it becomes terrifying. Abruptly ending today’s imbalances will be a truly cataclysmic event, so the once greedy money masters feel they have no choice but to keep the boom going; petrified of the pitchforks that may come their way if they do not.
This is where we are today. Central bankers are painting themselves further and further into the proverbial corner with no chance of getting out unscathed.
When the euro was first created it looked like a boon to …read more
Source: The TARGET2 Chart Shows A Breakdown Of The Central Bank Narrative
