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.
Money in the Circular Flow
Money plays an important role in both the Post Keynesian and circuit theory approaches. In the circuit approach, macroeconomic identities and the logic of circular flows are emphasized. In this method, all values are in nominal terms; thus, money is analyzed according to the role it plays in these nominally valued circular flows. In contrast, most Post Keynesians have emphasized money as a stock and have paid particular attention to the impact rising liquidity preference has on circular flows. Some Post Keynesians, however, have also recognized that as all spending must be financed, the money supply must expand endogenously to finance a growing circular flow. In addition, Post Keynesians have tended to pay more attention to individual decision-making than have those who adopt the circuit approach. The most important difference between the two approaches, however, is probably the treatment of uncertainty. Because Post Keynesians are particularly concerned with ex ante decision-making, uncertainty plays a major role in their view. On the other hand, circuitistes tend to focus on ex post aggregate identities, where uncertainty plays no role. Thus, the different treatments of money in the two approaches can be attributed at least in part to a difference in emphasis over where analysis should begin.
Designing a Central Bank for Europe: A Cautionary Tale from the Early Years of the Federal Reserve System
Important questions concerning the structure and operation of a European central bank remain to be answered. Although there exists no precedent for the process of institution-building in which the European Community is currently engaged, the founding and early operation of the Federal Reserve System in the United States provides a suggestive parallel. It suggests that Stage 2 of the Delors Plan contains potential sources of instability. It suggests attempting a direct transition from Stage 1 (national monetary autonomy) to Stage 3 (centralization of authority). It suggests the need for more thought about voting and mediation procedures to be used to reconcile and aggregate national interests.