E018 EURO: A Political Project that Detached Monetary Policy from Fiscal Policy and Created the Mess

In this episode, I go over a brief history of the euro, its impact on monetary policy and fiscal policy of eurozone countries, and how the current “QE” initiative can lead to the euro’s demise.

The euro is a political project championed by Francois Mitterrand, but his original plan was to have not only a common currency, the euro, but a common European budget. This did not have sufficient public support in Germany, so the politicians kept half of the plan.

Without the lever of monetary policy, eurozone countries can no longer cool down an overheating economy or restart a stagnant economy by controlling the monetary supply individually. When there is great difference in economic reality across them, this spells disaster.

The European Commission, highly incompetent and corrupt, encouraged all the feel-good reckless programs that overheated the economies in the peripheries (PIIGS). The rest is history.

Today’s money printing by the ECB will result in stagflation, with high inflation in consumer prices coupled with low growth and high unemployment. The days of the eurozone may be limited.

Related video:
https://www.youtube.com/watch?v=bgK84xepAdA