Exactly nine years ago today, Europe was tumbling into chaos.
The Greek economy was collapsing, as nationwide strikes turned violent.
In Hungary, the spokesman for Prime Minister Viktor Orbán let it be known that the nation also faced the real prospect of a national default.
In the U.K. House of Commons, debate was raging about the prospect that Great Britain might fall into a similar sinkhole.
And the euro plunged to a four-year low.
Today, Europe’s ghosts of the past seem to be returning.
In Italy, an anti-euro coalition of left and right populist parties has come to power. This is sending shivers up the spines of Brussels eurocrats and shockwaves through halls of European debt markets.
In Spain, a corruption scandal has derailed Prime Minister Mariano Rajoy, adding to the confusion.
Everywhere, financial markets are going haywire.
Like in 2009, Europe’s sovereign debts are among the first to feel the impact. And like in 2009, the euro is plunging again.
Lurking behind the scenes, and periodically bursting to the fore, is the same fear that bedeviled markets in 2009.
Investors are afraid that nosebleed debt levels will erupt like a volcano … that PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) might default … that the European Union might dissolve.
What is it that troubled economies had in common then and STILL have in common today?
You guessed it: Chronic public debts and deficits that were (and still are) unsustainable and unpayable.
How then have the weakest, most-indebted nations of the E.U. survived? Many people think it’s thanks to the bailouts and handouts from the most powerful nations of Europe — mostly Germany.
But the fact is, the sporadic debt bailouts of that period were actually small in comparison to the more powerful weapon deployed — not just once or twice, but consistently, year after year.
I’m talking about unabashed, flat-out debt monetization, used to continually prop up the PIIGS debt markets. It was Europe’s unique brand of quantitative easing. It was money-printing. And it was huge.
Italy Today vs. Greece 3 Years Ago
Italy is the epicenter of this week’s crisis, generating most of the speculation and fear about the future of the European monetary union.
European markets are especially spooked because the new coalition coming to power in Italy is so fervently anti-E.U.
Sound familiar? It should.
Because this is very reminiscent of what happened in the wake of victories by the anti-EU Greek Syriza Party back in in the mid-2010s.
“Unless the Troika made up of the EU, ECB and IMF are willing to relax the austerity requirements attached to their bailout offers,” said Syriza leaders, “we will simply yank Greece out of the Eurozone and be done with the whole deal.”
That’s when Europe truly showed its teeth.
That’s when the European Union made the decision to effectively weaponize the euro … forcing the Greek government to surrender an even greater portion of its sovereignty by agreeing to even harsher austerity measures.
Or else.
The threat: To cut Greece off from the euro completely, allow its banks to fail, and precipitate a depression even more severe than what the country had already been through.
The crisis came to a head just about three years ago, in late June 2015.
To show they meant business, the Troika effectively cut off “Emergency Lending Assistance” for Greek banks just a few days before their bailout program was scheduled to end.
Depositors could withdraw no more than 60 euros per day from ATMs. Bank accounts were frozen. A one-week bank holiday was declared.
The EU effectively starved Greece of money, forcing the newly elected government to accept one of the most Draconian packages of austerity measures of our era.
A few months later came the “bail-in.” All of a sudden, the insured bank deposits of Greek citizens were effectively confiscated by the European Union. Savers suffered a 20% haircut across the board.
Poof! Money’s gone.
This is how the EU transformed the euro into a weapon. Like a dirty bomb lobbed into the financial system of a supposedly sovereign state that dares question the authority of the Union.
So don’t be surprised if steps by Italy to similarly pull the plug on the euro are met with equally punitive measures.
A scary, but possible scenario …
Brussels eurocrats cash-starve the country.
Italian leaders, regardless of ideology, beg for money.
They sign any needed documents. They fork over sovereignty. They cave in to nearly all demands.
Citizens cry out for change, but also for mercy. At the end of the day, they have even less choice in the matter than their leaders. They have virtually no place to go for money other than their banks. They’re trapped in a system, where you either play by the rules of the central authority, or you’re out of the game. Meanwhile …
The EU is among the biggest advocates for the elimination of cash and the move to fully digital money.
Money they can create, monitor and use as a means to manage, control and even repress dissent.
Under authoritarian regimes, that could mean not just your financial transactions, but also which political parties you join, which rallies you attend, to whom you talk. Make the “wrong” choices … and you lose access to the digital money system.
A dictator’s wet dream.
That’s why we’re seeing repressive regimes in Venezuela, Russia and Iran suddenly “embracing” cryptocurrencies. More control means fewer ways for people to slip under the radar … and no way to escape.
Not convinced? Then be sure to watch this presentation by Andreas M. Antonopoulos, given in Vancouver Sept. 12, 2017.
The big difference today is we finally have an alternative.
Fortunately, we now have a different system. A decentralized, permissionless, censorship-resistant, borderless and neutral form of money. One that does not bend to the rules of dictators — not even semi-authoritarian coalitions like the EU.
The point of this technology: To separate money from state control. To restore sound policies. To protect our wealth from the whims of wayward politicians and technocrats.
A democratic form of money. One that can be engineered according to specification … which allows everyone, as a community, to decide who has the right to do what, when and how.
A form of money that can also be engineered to guarantee a return to the core principles of what makes money sound: A medium of exchange. A store of value. A unit of account.
No more, no less.
Best,
Juan
