To answer another question concerning the move from hard money to paper money--from the origin of money in Mises “regression theorem“ to the destruction of money in what Salerno and Huelsman have called the “progression theorem”--I had the occasion to reread J.G. Huelsman’s excellent piece on political centralization from the JLS. The whole article is worth revisiting. He argues that the same forces that drive the monetary system away from gold to paper also force a change from small and lcoalized government to large and centralized government. In this passage, he argues that the origin and growth of the EU government can be found in regime financial irresponsibility:
The case of the European Union is an excellent illustration of a central institution that helps to reduce the co-ordination costs of several highly indebted—and contagion-threatened—governments. In the European Union, some states—Belgium, Italy, and Greece—are virtually bankrupt. Other states, including Austria, Portugal, Ireland, Spain, and Sweden, are on the wave of becoming so, and the rest is not much better.20 In other terms, more and more members of the European Union need to be bailed out.21
It will not take a very long time before no private investor will give them new credits. As the governments know this, they have started to become serious in their bargains with other governments. This has accelerated the negotiations leading to the reinforcement of the central bureaucracy in Brussels. Most of the governments became more interested in a coordination of their financial and economic policies. They needed an instrument to facilitate the complicated multi-lateral bargain. Of course, the European Commission was glad to step in. Now, it is our governments’ servant. In the future, it could be their master.
