The Euro: A Chartalist Critique
Abstract: The aim of this article is to develop a Chartalist critique of the prevailing economic theories that have informed the original design of the Eurosystem. In order to understand the structural dynamics of the current crisis, it is necessary to examine the longstanding internal contradictions that the system has inherited from its inception under the Maastricht Treaty of 1992 and the neoliberal strategy, which has governed its evolution. In its bare essentials, the euro lacks the backing of a coherent sovereign power. More specifically, the article argues that this national/supranational dichotomy prevents a more unified response to the current debt crises engulfing the peripheral countries of the Eurozone.
Supra-National Money and the Euro Crisis: Lessons from Karl Polanyi
Abstract: The paper seeks to examine some of the key features of Karl Polanyi’s ideas explaining the collapse of the pre-Great Depression unregulated market system by using his broad framework of analysis, as developed in The Great Transformation and published over 70 years ago, to explain the present Eurozone crisis. Emphasis is placed on the two key institutions of the pre-Depression era, namely haute finance and the gold standard, as well as his heterodox views on the nature and origin of money to shed light on the evolving crisis within the Eurozone. On the basis of Polanyi’s insights, the paper concludes that the cause of the latter crisis is similar and it lies primarily in the adoption of stateless or supra-national money that is even more restrictive on the behaviour of national authorities than the conditions imposed under the gold standard. The current situation of quasi-permanent austerity in the Eurozone is the inevitable consequence of its monetary architecture, and it will remain a long-term feature of Europe, unless significant institutional changes are put in place to bridge the gap between money and the state.
Rethinking the role of NCBs in the EMU
Abstract Five years after the introduction of unified monetary policy in the EMU, some member countries are wondering whether they have ceded too much of their policy-making powers. The fact that National Central Banks no longer carry out sizable expansionary open market or foreign exchange market operations suggests that they face substantially reduced abilities to set economic policy. This paper demonstrates that, in fact, very little power has been yielded: on the fiscal front, the force of such policy initiatives is enhanced by the fixity of the exchange rate. On the monetary front, we show that there is an observational equivalence between all Central Bank actions under fixed exchange rates. This implies that the authorities retain the same amount of policy flexibility as before. So long as they use an alternative form of policy initiative, carrying out what previously would have been characterized as sterilized foreign exchange market operations, their ability to influence the macro performance of their economy is undiminished.