We have already described in our pages how money was destroyed in Poland for centuries (a whole series of articles on this subject can be found exactly here), as well as in the world (we must send you here). Today we can see that we are entering a new era – currency wars. On one side we have a dollar, on the other a yuan (maybe soon in a digital version). In the middle of it all there is the euro – from these mentioned works, however, probably the closest to us, but at the same time in economic terms the most strange. As part of this series, we will tell you about how the single European currency was created and why it is not necessarily a successful project.
Europe – a region of continuous conflict
Yes, we know that modern Europeans associate war mainly with gameplay with “Call of Duty” or “Medal of Honor” or books and films on this subject (often – to put it mildly – stupid, from which we learn, for example, that the Nazis were semi humans, half reptiles). Unfortunately, the history of our continent is a story of constant conflict. From ancient times, the conquests of the Romans, through the Middle Ages, to two world wars, which had their roots in in our region.
Of course, wars – contrary to almost fairy-tale descriptions from history textbooks – do not break out because of trivial matters (or at least most). Most often it concerns economic issues.
Here we are slowly approaching – although we warn the impatient: it will be a definitely long journey – to the genesis of the euro. We are already explaining what we mean.
In the nineteenth and early twentieth century, people lived in times of globalization. International trade flourished, and then the powers of the time grew – in particular Great Britain. However, it turned out that not only. And that was the problem. Just as China has gained globalization in recent years, so over 100 years ago Germany grew in strength. This could not be liked by the elites of the United Kingdom. Let us not enter here who exactly provoked the outbreak of World War I. In the official narrative it was Germany, but the truth lies – as always! – in the middle. Almost all European players wanted a conflict. Germany, because they planned to finally show their strength. England – to defeat their main rivals before they grow too strong. In addition, the outbreak of the conflict met with unprecedented enthusiasm of society (in one photo from this period you can see almost crazy, 25-year-old Adolf Hitler, who stands in the crowd on the Munich square cheering because of the war announcement). Probably due to the fact that today, as many of us associate the fight on the front with a nice adventure, so then young people knew it from the stories of their fathers and grandparents.
(Let us briefly deviate from the main topic. Note that today it is often repeated to us that the European Union guarantees us peace in Europe. However, it is interesting that this reigned in 1871-1914, when there was no European community. What does this mean? Wars break out when one of the parties decides that the conflict is profitable for her. The creation of international alliances is of little use. It was seen, for example, during World War II, when some countries freely changed their alliances.)
World War I ended, as we know, with a great defeat of Germany. These were decided to completely destroy and finish off the terms of the Versailles Treaty.
However, it turned out that such a violent action provoked an equally strong reaction. In Germany, there has been an economic crisis fueled by hyperinflation of the brand. This favored extremists – both communists and Nazis of the already mentioned Hitler.
Ultimately, the latter took power, with their policies – which John Maynard Keynes, an economist, loved at the time in the USA, where the New Deal was implemented, would not be ashamed – rebuilt Germany’s power and … began preparations for extra time in the fight for control over Europe and the world.
As we know, World War II also ended in Germany’s defeat. This time, however, it was planned to shape the world after the conflict completely different …
It is worth recalling Banker on this occasion. It was a project a bit reminiscent of what Facebook Libra could become. Maybe it had something of the euro in it – certainly an element about the fact that it could be a single currency for many countries.
The father of the project was the mentioned Keynes. This British economist wanted to create something extremely ambitious – a system of stabilization of all currencies entering it. In practice, it would allow for quick recycling of trade surpluses, which would be “activated” as soon as the first alarming symptoms appear on the markets. How did you want to achieve this? The first step would be to establish a fund that would have the character of a global central bank. He was supposed to issue his digital currency, which was to be Bankor.
Bankor – just like Bitcoin or LibraCoin today – was not supposed to be physical. It would not be printed or issued as a coin. It would exist only in spreadsheets (today it would be based on blockchain). Despite this, it would function as an almost global currency, in which it would look very much like cryptocurrencies. Only that he would have one issuer (like LibraCoin), not infinitely many (like BTC).
Each country was to have an account in Keynes’s account at the International Monetary Fund (IMF) expressed in bankers. The system was to operate as follows:
- the bankory would be deducted from the account when the country would buy goods from abroad,
- in turn, currency units would be deposited in the reverse situation, i.e. when the citizens of another country or company would buy goods and services from that country.
It’s quite logical: the currency was simply to be used for international transactions. National currencies would continue to operate, but only as internal units of account of given economies. It is a bit like today the euro would only be used for trade between individual EU countries, while in Germany the German mark would still apply, while in France the franc.
Keynes presented his idea at a conference in Bretton Woods in 1944. There was still a war in the world, but the Western powers knew that they would win it, so they were preparing to build a new order.
The British economist’s idea collapsed. The US elites did not like it. As a result, the International Monetary Fund was created, but not in the central bank version. The IMF has become just a place where debates on exchange rates. A World Bank was also established – an institution that was to deal with directing funds to backward countries and those with trade deficits.
During the meeting in Bretton Woods a fixed exchange rate of the dollar against gold was set. One ounce of gold was to cost exactly 35 USD. The dollar has also become an international currency convertible to gold. Other currencies were also associated with it. And there was a big, as it turned out, problem …