Mark W. Hendrickson

The euro is more abominable and more dangerous than your typical fiat currency. Today’s Federal Reserve note (i.e., a “dollar”) is like a giant oak tree that has become a hollow shell. Most of its substance has been eaten away by the inflationary creation of far too many units of fiat currency (all needed to finance government’s insatiable appetite for spending). It still manages to stand, to serve in its weakened and brittle state as the medium of exchange, because it still has the “full faith and credit” of the U.S. government supporting it.

But as pathetic as Federal Reserve notes are, the euro is even worse, because there is no entity whose “full faith and credit” lies behind the euro currency. Each more hopelessly indebted than the other, 17 countries use the euro. Which of their governments can command sufficient economic resources to bail out zombie banks and bankrupt sovereign treasuries?

Returning to the tree metaphor, the euro was grafted together from pieces of 17 (so far) dying fiat currency trees of different species. The euro has had no roots from day one. It did not evolve naturally from market forces. Its trunk was stitched together from pieces of the deutsche mark, French franc and Italian lira fiat currencies, with its main branches from the peseta, the punt, the Dutch guilder and its minor branches from remnants of the fiat currencies of smaller economies, such as the Greek drachma and Portuguese escudo. The sutures that stitched together those decaying fiat currencies consisted of nothing more substantial than lies and empty promises. These were solemn pledges that debts and deficits would never, ever reach levels that were long ago exceeded. The experts who devised the euro currency were naive to have believed that democratic politicians would have the honor or capacity to maintain fiscal discipline.

The euro is a monstrosity doomed to be rent asunder by economic gale-force winds. Like characters in Jean-Paul Sartre’s grim play, “No Exit,” the people who use the euro currency are trapped. Either member countries will abandon the euro, in which case banks, governments, businesses and individuals go through a wrenching period of defaults, write-downs, “haircuts” and bankruptcies, or they lurch onward toward an unviable fiscal union in which Germany, Finland and the few relatively solvent economies are crushed under the unsupportable weight of being expected to bail out the relatively bankrupt countries.

How much longer can the macabre dance of the EU’s Frankenstein currency last? Europeans are paying an awful price for having adopted a Frankenstein currency instead of the real thing.


Mark W. Hendrickson

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.