Europe Unraveling -- but Is That All?

The news from Europe is uniformly disturbing. The trouble that started in Greece has received only a band-aid, and now the Greeks themselves are not even certain that they wish to put it on. Meanwhile, Spain, Portugal, Italy and Ireland are teetering on the brink, as well. Even the incoherent "protesters" who wanted to shut down the London Stock Exchange managed only to shut down St. Paul's Cathedral instead. Can't anyone in Europe do anything right? (The word "ineptocracy" has been coined to describe the phenomenon, which is, in my own phrasing: "A system where those least capable of leading are elected by those least capable of producing. The former then bungle through as long as they can, by taking from those who are producing, until everyone may enjoy being as impoverished as those who are not producing.")

We may finally be witnessing the inevitable consequences of a global system built upon exclusively fiat currencies -- money that consists only of paper promises. When an economy's medium of exchange is transformed from gold into paper, a certain convenience is achieved, to be sure -- but the convenience comes at a huge hidden cost. As I explained in my previous series on money, paper money is based entirely on debt -- on promises to pay in the future. But pay with what? You guessed it -- more paper money, or more promises to pay. An endless and spiraling cycle of debt is the driver of a fiat money economy.

Read the rest here.
HT: Bill (aka The Godfather)

Good post. I doubt that we will see the complete collapse of fiat paper currency. But I do think that there is going to be a dramatic devaluation of most of the world's currencies as a necessary consequence of the staggering levels of debt, which can not be paid off without some combination of a draconian program of austerity coupled with sharp tax rises and or deliberate financial repression with currency debasement and inflation as its corner piece. Historically few nations, and no democratic ones that I am aware of, have had the intestinal fortitude for the kind of long term deep austerity that would be necessary. That leaves us with the printing press.