The bursting of the euro area is the most common topic in many analytical approaches. For long period time there was questioned how the euro has been set up as the face of skepticism from economists while its creation has been nothing but supported in the past. Entering the Eurozone was a political decision for each member country of the area. Each of them was able to decide otherwise, and thus escape. Entry into the euro had its advantages: low interest rates, lack of currency volatility between the currencies of the zone. However, at the same time it was an entrance to the club of hard currency.

perperzona euro weakAn output of the euro will not necessarily have the benefits attributed to it. It is true that if some countries were not members of the area, their currencies have been devalued. But it would have been a constraint, which would force them to raise interest rates to restore confidence. The euro still offers advantages in terms of financing the economy, even in Greece. Moreover, even if a country out of the euro, the currency is still used by its citizens, because of the confidence it inspires. The euro is used widely by countries bordering the area. However, what is interesting is the argument put forward by economists who do not believe the euro. They point to the fact that countries in the region are too different to be economically the same currency. Convergence is insufficient. At best, they feel the need to strengthen political governance of the area, so that each country has the same policy. At worst, they predict that these differences can only lead to the bursting of the area, or, at least, the output of some countries. This argument stems from the teaching of economics. The prevailing view is that money is a sovereign domain, a prerogative of the state, and an instrument of economic policy. Therefore, in this paradigm, the euro is part evil. Yet money is not necessarily a prerogative of state. Bills of Exchange, ancestor of paper money, were private. The system of the gold standard can be both public and private. It forced banks to discipline, monetary regulation. Economists, like the Austrians, defending a private currency. Moreover, the fact that the gold standard back in the debate shows that the problem of monetary and economic unrest, it is precisely the fact that money has become an instrument of economic policy.

Indeed, monetary policy aims to ensure growth. It systematically reduces interest rates when growth slows. The interest rate is not the regulator of the risk, but an instrument of economic policy. It is decreased when growth slows to rise, and possibly increased when inflation risks are becoming way too large. The current crisis comes as a revival of the U.S. economy by the credit recovery caused by the U.S. government and the U.S. central bank. The countries that have experienced a similar phenomenon, such as the United Kingdom and Spain are the most affected countries after the USA. Banks are also protected, so as not to endanger the economy. Because of that the interest rates are lowered to the cyclical hitch: to restore their margins. The belief in the protection of monetary policy is very strong. This is how countries in the euro area could borrow excessively. But other countries were also able to borrow in dollars or euros, as Hungary. The world was so confident in the monetary mechanism: just cut interest rates to stimulate the economy. The question is where the risk is, if there can be controlled the economy as it controls the flow of a tap, through the interest rate.

The result is a lack of regulation of risk. The regulation of risk is based on responsibility. If someone makes a bad investment, he bears the losses. But today, banks are protected, buyers of government bonds are protected. They do not question the relevance of their investments, they provide credit in the case of banks. They know they will be protected in case of bankruptcy of borrowers. The interest rate should be the indicator of risk. As set by the authorities, it does not fulfill this role. The interest rate should result from risk analysis. It is instead defined in terms of monetary policy. The ECB is independent in theory, and has a goal of monetary stability. However, in practice it has followed the movement of the U.S. central bank, even if sometimes it is discarded. Above all, the ECB considers that it can control money creation. It can know what creation is necessary for the economy. And it actually acted as if the euro area was a homogeneous country.

There are two failures – the Fed, the U.S. central bank, who wanted, with the U.S. government, to revive the economy by the credit. The ECB has failed with the same interest rate for the euro area, regardless of the particularities of each country. As for financial institutions, they have abandoned any analysis of creditworthiness of borrowers’ public, private and even sometimes with the protection of monetary policy, and the effectiveness of this policy. What is needed is to draw the consequences of these failures. By empowering, at least in part, money creation States, the ECB is a step in that direction. This movement is part, as the ECB still feels with a mission of economic policy, as shown by its decision to buy bonds of countries in the euro area. It is nevertheless a first movement that challenges conventional wisdom. The model of the ECB does not come from a large economic theory. It comes from the Bundesbank, the German central bank, which held the country’s monetary stability, and prosperity. The process is a process of liberal learning. Bad decisions lead parts, which prevents them again. However, it has been growing the system without this learning process and regulation. Tour is to relearn, so that the system has grown considerably. A wrong decision may actually lead to a collapse.

The ECB may also differentiate between interest rates paid to banks in different countries. Instead of serving a global interest rate as today. Finally, the ECB could always stop funding the banks. The principle of central banks is to fund the banks that lack liquidity. By forcing them to fund only the financial markets, we force them to monitor the solvency of banks and thus their behavior, their credits, their investments. These are only assumptions. Another hypothesis would be to return to the discipline of the gold standard.

This debate on the role of money is largely absent, except in newspapers and business magazines. It sometimes appears under the form of a call back from the gold standard. However, the real debate is posed by the crises of recent years, since the 1970s in fact, when appeared the need to fight against inflation. The fight against inflation was a first step. Now is the control of money creation by central banks all powerful, rather than a market mechanism controller, which is in question.

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