Is there a future for the Euro zone?

Question by Adeyanju Alade; Laurea University of Applied Science

What is the future of the Euro zone as a network within the context of members which are facing economic problems?

As the situation stands I do not see a future for the Euro zone. My reasons:

i.Money, of itself, has no value. It has no backing. We, the users of money, give it value. The value we give money is equal to the value we can gain from what we can purchase with money. In the case of loans, the borrower’s ability to repay depends on their ability to create value others are willing to pay for.The surplus-difference between their production costs and their sales income is what is available to repay the money they have borrowed.

If money is spent on financing consumption (eg: via wages paid) or on financing speculation (the monetary value of, say, property driven ever higher in price as a consequence of  the over supply of money) then little or no value is created. This is like feeding a hungry man with fish. If the fish consumed was supplied by a country other than the Euro zone member’s country, the hungry man’s money flows to the country that supplied the fish. What is left is a well-fed man needing more fish, and the fish bones.

However, if the money was used to increase the borrowers value-producing capability to make wanted goods or services, the borrower is likely to have the surplus funds to re-pay their borrowings. Instead of lending money to the hungry man to buy fish, he uses what he borrows to buy a boat and nets to catch fish. The result, he feeds himself and hopefully has a surplus to re-pay his borrowings.

It appears the lenders (European banks and others) lent to Euro zone members, who are now unable to repay, without first ensuring the borrowers would have the ability to repay; did not ensure that what was lent would not be used for consumption or speculation; did not ensure it would be used to increase the borrowers value-producing capability       In other words, the money was unwisely lent and used, it seems, for consumption and speculation.

Conclusion: The lenders acted with gross irresponsibility. They are requiring financial sound Euro zone members to pay for their losses. This represents, at best, a total mismanagement of the EU monetary system or an intention by lenders to defraud the financially sound members within the Euro zone and financially weakening them.

ii. The borrowers are being asked to reduce their spending (consumption).ie to eat less fish. There appears to be no efforts being made by the lenders and Euro zone members to help the borrowers to increase their value-producing capability. As mentioned above, the ability to repay depends on the surplus – differences between their production costs and sales income. If this value-producing capability of the borrowers is not being treated as a top priority by the borrowers and their lenders, it is highly unlikely the lenders will be able to repay.

Conclusion: The prime focus is currently on ensuring the lenders get paid and not on increasing the borrowers value-creating ability for them to re-pay. This is financial exploitation vs economic progress.

iii.  About a trillion Euros have, between Dec 2011 and Feb 2012, been created (printed) and supplied to the lenders.If money is created without an equivalent increase in goods and services, there is inflation.This was the case with Spain which imported vast amounts of gold from the South and Middle Americas. Hyper inflation was the result.

Conclusion: Hyper inflation will occur throughout the Euro zone.

The management of the Euro zone monetary system is fatally flawed. It is non-sustainable. At best, the Euro zone is likely to last, as it is, for no more than months. Our business, economic and social systems are based on a this  Euro zone monetary system.

Recommendations: Do not borrow; pay off loans; becomes self-sufficient; develop self-supporting communities; grow your own food; use natural seeds; use sustainable farming methods; invest in the quality of your life.

 

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