Who is the sovereign?

 

           On a British banknote the Queen’s face looks out as a symbol that the country stands behind its currency. The Chief Cashier of the Bank of England signs a promise to “pay the bearer on demand the sum of ….”. On the other side our banknotes have pictures of well known figures from our country’s past. No-one can be in any doubt. Buy sterling, and you get a currency backed by the UK state. The state’s power to tax and to intervene in banking and currency affairs stands behind those pieces of paper.

          When they came to design the Euro they had problems. There was no shared uncontentious history on which they could draw with figures and scenes from the  past. There was no sovereign figure.  There was no named  Chief Cashier willing to sign the notes.  They came up with something different.

           On one side is a map of  Europe, including non Euro countries as well as Euro countries, and including non members of the EU. So clearly whilst they wish to give the impression that Europe stands behind this currency, the detail lets down that idea.  There are also drawings of stylised bridges. These are similar to styles of bridges in Europe, but are not meant to represent any particular place for fear of disputes about which should appear. On the other side are drawings of differing styles of European architecture, again without a specific building or place in mind.  The twelve stars symbol of the EU appears on both sides. There is no symbol of the Euro area or ECB.

            In one sense all this is relatively unimportant. In due course when they have completed their union more fully they may be able to reach agreement on popular symbols of it. They may unite around Charlemagne despite his often violent approach to human rights, or some other sufficiently distant person to be relatively uncontentious. More recent advocates of European unity prior to 1945 have gone about it in ways that still cause distress.

             In another sense the symbols or lack of them sum up the key problem of the current Euro. No-one can be sure of who or what does stand behind it. When it came to Cyprus, the answer was the rest of the EU did not stand behind the Cypriot Euro if you held it in one of the wrong banks. The Euro countries are in the process of providing a better answer to this question. We need to know who stands behind the banks of the system? Who stands behind the member states borrowings? Does a Euro note have the backing of all Euro area taxpayers in the way a sterling note has the backing of the taxable capacity of the UK state?

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103 Comments

  1. lifelogic
    Posted November 10, 2013 at 6:22 am | Permalink

    “Does a Euro note have the backing of all Euro area taxpayers in the way a sterling note has the backing of the taxable capacity of the UK state?”

    It does while it suites the unelected bureaucrats for it to do so. If it suites them to rob people with bank deposits or other assets they will not hesitate it seems. Human rights in the EU do not seem to extend to the right not to be mugged or 50% enslaved by the state.

    Mind you in the UK we have a gentle, but intentionally government arranged devaluation and with negative real interest rates. A more gentle robbing of the public and their pensions but just a real.

    • lifelogic
      Posted November 10, 2013 at 9:19 am | Permalink

      I see the Coalition says it is taking action against payday lenders in response to Miliband wanting to ban loans ads on kids’ TV. Well when exactly?

      The only action needed is a cap on APRs at about 30% (with a few business lending exceptions) anything else is mere tinkering. A loan at 4000% APR is no value to anyone just a source of misery for the desperate and dim. In fact nearly all daytime TV ads are for daft things, over priced life insurance with a free pen, no win no fee ambulance chasing lawyers or 4000% loans, or over expensive shavers, hoovers or foot spars, perhaps they should all be banned?

      Not that I am usually in favour of banning things – just do not buy anything of daytime TV seems to be the best message.

      • Bazman
        Posted November 11, 2013 at 6:39 am | Permalink

        Plenty of time to watch daytime TV at your secret hideout do we? It’s work Jim, but not as we know it.

      • The PrangWizard
        Posted November 11, 2013 at 11:03 am | Permalink

        In response to Milliband? – crumbs is this true? I commented the other day about the government copying a version of his attack on builders. He said take their land, the Tories say take their planning consents. This followed their copying another of his ideas week or so before that. Milliband called Cameron weak. Hate to say it, but he is correct. And he sells England down the river by closing our shipyards to appease Scottish threats. Why bother with an general election? We really do have the Coalition extended into all three main political parties openly for all to see and a mush of Leftist policies.

        This is dangerous for democracy. Where are the thinkers on the Right, who can speak up forcefully for freedom of the individual and free enterprise? Will we hear their voices, or will the BBC and MSM broadcasters continue to limit their exposure while favouring the present arrangements.

        • Tad Davison
          Posted November 11, 2013 at 4:28 pm | Permalink

          ‘This is dangerous for democracy. Where are the thinkers on the Right, who can speak up forcefully for freedom of the individual and free enterprise?’

          I can only think of one party that has any real chance of breaking the social democratic EU federalist monopoly – UKIP

          Tad

    • Timaction
      Posted November 10, 2013 at 12:11 pm | Permalink

      What we need LL is our sovereignty back from the EU!

    • lifelogic
      Posted November 10, 2013 at 12:52 pm | Permalink

      I see that the ever present “BBC thinker” (and thus wrong on virtually everything) Shirley William, Baroness Williams of Crosby (and yet another PPE graduate) is absurdly trying to blame the dreadful problems in the Philippines on global warming. Clearly she has not looked at much weather history.

      The science clearly suggest the reverse is actually far, far more likely. Buy why let the science get in the way of a good scare storey. Anyway we have not had any statistically significant warming yet so how can it be the cause? The warmest year on record was 1934, when Shirley was just 3 or 4 perhaps she can remember it?

      • Richard1
        Posted November 10, 2013 at 7:31 pm | Permalink

        The extreme weakness of the global warming alarmist case is demonstrated by the way its advocates jump on any and every extreme weather event and attribute it to man made CO2. Such evidence as there is indicates no correlation at all between these events and CO2 levels, and no increase in the incidence or severity of such event with rising CO2. This is why we need a proper open public enquiry and debate on this issue. Its too important to be left to glib propagandists.

        • lifelogic
          Posted November 11, 2013 at 10:53 pm | Permalink

          a proper open public enquiry and debate on this issue – that seems very unlikely under green behind the ears Cameron.

      • Richard1
        Posted November 10, 2013 at 7:43 pm | Permalink

        I just listened to this discussion. Shirley Williams asserted the Philippines storm was due to global warming. Fraser Nelson pointed out that in fact there is no such increase in extreme weather events, rather a reduction, whereupon Andrew Marr, presumably following BBC guidelines, insisted on no discussion and moved on. Someone can make an alarmist assertion, but even if the evidence is its clearly rubbish, it cannot be challenged on the BBC.

        • lifelogic
          Posted November 11, 2013 at 10:54 pm | Permalink

          Indeed the anti science BBC.

          • Bazman
            Posted November 15, 2013 at 4:57 pm | Permalink

            You believe you can have your own facts and any science that disproves them is wrong.

      • Tad Davison
        Posted November 11, 2013 at 4:41 pm | Permalink

        One of the worst storms ever to hit the UK occurred in 1703, but I don’t think there were many cars and aeroplanes around then, and certainly no power stations or factories.

        And I’ve been doing a bit of research lately into the green taxes being proposed by the US government, and who is likely to benefit from them. What the US does, we usually follow. It’s well worth an internet fishing expedition to see what one can turn up. Highly recommended.

        Tad

    • Hope
      Posted November 10, 2013 at 5:24 pm | Permalink

      The real sadness with the corrupt institution called parliament is that many countries followed the UK in shaping their countries. A few MPs seem to think that it is okay give away our sovereignty and national identity without the consent of the public or by deceiving them because an outright question based on honesty would see the UK leave the EU. Why would the people of the UK want to give up its sovereignty when men have died to protect this right of their fellow citizens. They did not do so to be part of an EU superstate. Sovereignty is being lost through stealth and deception by politicians not the public or with public consent. Even loss of sovereignty by social engineering through mass immigration was at the heart of the last Labour government. Some of the hypocrites who laid wreaths at the Cenitaph should be ashamed of their behaviour because those who died gave their lives for the sovereignty and independence of the country not for it to be given away by deceit by some of those who laid wreaths .

  2. Peter van Leeuwen
    Posted November 10, 2013 at 6:44 am | Permalink

    Needing a sovereign’s picture on a bankvnote is an invented problem, the Dutch banknotes had pictures of a grebe, a lighthouse, a sunflower, less boring than looking at one’s queen all the time.
    What matters is reliability. If I had been en English pensioner living in Holland, my income would suddenly have dropped some 25% a few years ago. I prefer a reliable currency over a nice design.

    • Mike Stallard
      Posted November 10, 2013 at 7:34 am | Permalink

      …and if you lived in Greece?

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:32 pm | Permalink

        @Mike Stallard: Well as a Dutch pensioner I would be o.k. but as a Greek pensioner in Greece, indeed, I would be suffering sadly. Mind you, the Greeks didn’t and don’t want to leave the euro.

    • lifelogic
      Posted November 10, 2013 at 7:36 am | Permalink

      Indeed the UK pensioner living in Holland would have been far better off if the UK has been outside the EU and rather like a Greater Switzerland, with a strong currency, a well run economy and more direct democracy. Then over the last ten years they would be about 35% better off rather than about 15% worse off.

      Alas Cameron does not like a Greater Switzerland vision, one assumes he has some irrational fear of Toblerones, mountains, cuckoo clocks or something similar. He has not told us why for some reason, just the daft bland statement.

    • Brian Tomkinson
      Posted November 10, 2013 at 9:18 am | Permalink

      Peter,
      You are welcome to your ‘reliable currency’, we want no part in it. As you are such an unqualified admirer of all EU activities, please answer our host’s question: “Does a Euro note have the backing of all Euro area taxpayers in the way a sterling note has the backing of the taxable capacity of the UK state?”

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:29 pm | Permalink

        @Brian Tomkinson: It seems to me (as a tax payer) I have already had to back up the euro in various bail-outs. The Netherlands is fully subscibed to the ECB and euro notes carry the signature of the ECB president.

    • alan jutson
      Posted November 10, 2013 at 9:32 am | Permalink

      Peter

      “I prefer a reliable currancy over a nice design”

      I think we all would, so I agree with that.

      Sadly politicians all over the World are rather different in their outlook, they all seem to want to borrow, and some even want to print, thus in effect they all devalue their currancy, its just a question of how fast.

      Only one solution it seems to me !
      Make it illegal for any government to borrow money in the peoples name (without a referendum) thus make them all live within their means, like most of us have tried to do for decades, and our parents before us.
      Then we may have politicians who will stop promising what we cannot afford.

    • Bert Young
      Posted November 10, 2013 at 9:56 am | Permalink

      PvL – what a ridiculous overview . We British are intensely proud of our Queen , the role of monarchy and the symbols that enforce it . Flowers come and go with the seasons , really only fully bloom when the sun shines , get blown over by the winds and storms ; what the monarchy represents is a steadfast enduring force . We Brits have thrived on independence ; our creativity over centuries are so well ingrained into our genes that we will continue to thrive and produce for the world products and services modelled for change and innovation , this is equally shown in the fields of arts and sports . I like Holland and the Dutch ; my office in Amsterdam served its major organisations through periods of change adding substantially to the economics of your country and the employment of its people . The bureaucracy in Brussels was insignificant and most of the time an irritant . For supporting detail go to Shell .

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:36 pm | Permalink

        @Bert Young: your point??? I don’t mind for one minute that you are proud of your queen, I actually happen to be extremely fond of our (former) queen, now princes Beatrix. I don’t need her picture on each and every banknote for that. Banknotes need to keep their value, that was my point.

        • Lindsay McDougall
          Posted November 12, 2013 at 3:51 pm | Permalink

          But nobody’s banknotes keep their value. Even the most virtuous of modern governments are content with 2% to 2.5% inflation.

          The last three British politicians that overtly went for zero inflation were the three heroes of Epiphany 1958 – Peter Thorneycroft, Enoch Powell and Nigel Birch. Their cabinet colleagues were unwilling to restrain public expenditure sufficiently to make that happen, so they felt obliged to resign. Harold MacMillan in his foppish, relaxed way described the resignation of his three treasury Ministers as a ‘little, local difficulty’ and hopped on a plane to Africa, there to deliver his famous Wind of Change speech.

          Like it or not, the failure of those resignations to influence economic policy was the moment that we condemned ourselves to unending inflation. The pound sterling purchases ONE SEVENTIETH of what it purchased in 1958.

    • Denis Cooper
      Posted November 10, 2013 at 10:23 am | Permalink

      In your example you’re talking about the external value of the euro against other currencies, and as can be seen from this ECB chart:

      http://www.ecb.europa.eu/stats/exchange/effective/html/index.en.html

      since its inception the external value of the euro against other currencies has been all over the shop, the trade weighted index ranging between a minimum of 81 and a maximum of 114.

      In fact in terms of its external value the euro is no more reliable than sterling; for several years after the launch of euro notes and coins your UK pensioner living in Holland would have benefited greatly from the devaluation of the euro.

      The lesson is that when currencies are allowed to float they will float both up and down, and that is true for the euro just as much as any other currency.

      And while this may bring some problems for people working in one country but being paid in the currency of another country, it will usually be better for them to have those exchange rate problems than to have the much bigger problem of no job and no earnings in any currency, which is what the euro has done for millions of people in parts of the eurozone.

      Not to worry though, as you said yesterday:

      “It will just take a longer time and some more hardship.”

      so that’s OK.

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:51 pm | Permalink

        @Denis Cooper: That the euro had to establish itself in the first few years is understandable. It has been a very stable currency for a long time now. I disagree with your ideas about fluctuating currencies, which have often been used as a tool in competition between nations. This caused quite a few problems among EU nations in the seventies and eighties. It is not the euro which caused unemployment but borrowing too much in/by a number of countries. And, if you believe the former German prime-minister Gerhard Schröder this weekend, the blame for the whole financial crisis could be squarely put on Britain.

        • Denis Cooper
          Posted November 11, 2013 at 1:23 am | Permalink

          “It has been a very stable currency for a long time now”

          Not according to the ECB chart, if you can be bothered to look at it.

          “I disagree with your ideas about fluctuating currencies”

          The euro fluctuates, as shown on the ECB chart if you be bothered to look at it.

          • Peter van Leeuwen
            Posted November 11, 2013 at 8:50 pm | Permalink

            @Denis Cooper: I had already viewed the chart with the fluctuations, which are mainly with the US, China and the UK. The chart doesn’t provide which currency is causing the fluctuation. In your case it was the GBP which had a devaluation. But I mean this about fluctuation in a different way: When I trade with the UK, I benefit for my business that there is no fluctuation in the pound between London and Nottingham, I can do business in both towns with the same pound sterling. A UK business benefits from there being no difference in the euro between Holland and Portugal, you can do this business in one currency.

          • Denis Cooper
            Posted November 12, 2013 at 4:57 pm | Permalink

            Yes, Peter, that’s right; the euro is perfectly stable, it’s all those other unstable currencies that keep changing.

    • Richard1
      Posted November 10, 2013 at 10:42 am | Permalink

      A Dutch pensioner living in Switzerland would have faced the same problem. The issue here is who’s got what liability. For the Euro to work, taxpayers in Euro member states are going to have go accept liability for the spending in other states.

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:52 pm | Permalink

        @Richard1: You are correct on the liability, that is a problem too much neglected in the past and still to be resolved. The banking union will go some way in resolving it.

    • Max Dunbar
      Posted November 10, 2013 at 11:20 am | Permalink

      Bland and smug.

    • Tad Davison
      Posted November 10, 2013 at 11:56 am | Permalink

      Peter, you do pick a most interesting day to have a go at our Royal Family and particularly our head of state, Her Majesty the Queen. Who would you suggest we put in her place, Edward Heath, John Major, Kenneth Clarke, Tony Blair, or Gordon Brown maybe? (all good pro-Europeans of course).

      It seems there is quite a big gap between your culture and ours. As Her Majesty, Queen Elizabeth, stood at the cenotaph earlier, to remember the fallen (even those from your own country) I found myself thinking ‘Thank you Ma’am, and God Bless you.

      Of course you will already know that at the end of the second world war, there were Dutchmen in the German SS, (words left out ed). Perhaps you would like to choose one of those ‘good Europeans’ as an emblem for your coinage?

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:26 pm | Permalink

        @Tad Davison: If anything I could only be “accused” of having a go at MY queen, as you’re probably aware that Dutch banknotes would not carry the picture of British royals! Instead of queen Beatrix, these notes showed a grebe, a lighthouse, a sunflower, and I don’t see anything wrong with that. My point is that a design is secondary to the value and confidence in a currency.

        • Tad Davison
          Posted November 11, 2013 at 10:34 am | Permalink

          Having OUR queen on OUR currency rather than a pretty flower or an animal, reminds us of our establishment. It suggests steadfastness and a solid institution. I wouldn’t say our system is perfect, but having a picture of the monarch is reassuring, not boring. It coveys the very confidence you speak of. The monarch’s portrait is also augmented with pictures of people who have made a valuable contribution to our society and our heritage, and this is the whole point. We have an identity, and it’s British.

          I did find quite a use for the Euro recently though. I was looking for a bit of hard non-ferrous metal to turn down on my lathe to make washers for a special application. In doing so, I actually increased their value!

          • Peter van Leeuwen
            Posted November 11, 2013 at 6:31 pm | Permalink

            a form of forgery? 🙂

    • oldtimer
      Posted November 10, 2013 at 12:39 pm | Permalink

      Symbolism matters. If it does not, why do Dutchmen (and women) dress in orange on your national (?) day – as I discovered on a holiday in Holland which coincided with it – or at football matches when the Dutch team plays?

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:05 pm | Permalink

        @oldtimer: I agree that symbolism matters (your holiday coincided with queen’s day om April 30th) but having a stable currency (now with Draghi’s signature on it) matters even more to me.

        • oldtimer
          Posted November 11, 2013 at 2:55 pm | Permalink

          @ Peter van Leeuven

          Well good luck with Draghi`s signature. I read in today`s Financial Times that your Dutch representative on the ECB Board voted against the 0.25% point cut in the ECB rate, along with his German and Austrian colleagues. It seems a split is developing in ECB governance.

          • Denis Cooper
            Posted November 11, 2013 at 4:03 pm | Permalink

            Ah, but at least the Dutch representative had his say before he was outvoted …

          • Peter van Leeuwen
            Posted November 11, 2013 at 6:35 pm | Permalink

            @oldtimer, @ Denis Cooper:
            Outvoting happens regularly in the Board of the BOE.
            You just want to be islanders among yourselves (+ 1 Canadian of course), we don’t mind being in a group with others in which we can be outvoted from time to time.

          • Peter van Leeuwen
            Posted November 11, 2013 at 6:37 pm | Permalink

            @oldtimer: this “split” has to be flagged down as typical islandic wishful thinking! The euro will survive, in spite of your wishes.

        • libertarian
          Posted November 11, 2013 at 9:46 pm | Permalink

          Peter

          You seem to have got it into your head that the reason we are anti EU is because we are islanders. I don’t know how to break this to you but I’m English and England isn’t an island!!!

          Oh and a history lesson for you., after the collapse of the last evil European Empire ( Roman) it was us Northern European Angles, Frisians, Jutes and Saxons that put in place a society that invented common law, democracy and trial by jury of peers amongst other things.

          All things that the new Euro Roman Empire seem to want rid of.

    • David Price
      Posted November 10, 2013 at 4:04 pm | Permalink

      So the plundering of peoples savings by the EU earlier this year never happened? Good job you weren’t a pensioner living in Cyprus or SPain …

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:08 pm | Permalink

        @David Price: how did Dutch pensioners living in Spain got plundered? English pensioners, yes (lost 25% of their pension in euro terms) but Dutch pensioners?

        • David Price
          Posted November 11, 2013 at 10:10 am | Permalink

          You claimed what matters is reliability, Cyprus and Spain are examples of the EU changing the rules at the expense of savers and residents regardless of where they come from so even Dutch pensioners would have been impacted.

          In Spain I believe you are now required to report all assets and holdings wherever they are held so you can be taxed on them regardless of the tax rules in your the country they are held.

          Clearly the Euro and it’s managers cannot be relied on.

          • Peter van Leeuwen
            Posted November 12, 2013 at 1:00 pm | Permalink

            @David Price: New tax laws do happen in most countries, yours not excluded. I personally think that the bail-in principle and shift of policy is a very good one, as it protects ordinary taxpayers who should only be a very last resort, and weren’t when the financial crisis (UK to blame according to Gerhard Schröder) and the sovereign debt crisis and credit crunch.

          • David Price
            Posted November 12, 2013 at 6:23 pm | Permalink

            @PvL The point is that your assertion is false, any Dutch citizen with funds and assets in Cyprus or Spain or Greece would be a victim of the “special measures” taken in those countries as a direct effect of the EU dictats. Are you certain there were none?

            Have you discussed the benefits of bail-in with any of your fellow Dutch citizens who were directly affected and were they as comfortable with the outcome as you? The Dutch negotiator involved in the Cypriot problem was not at all comfortable with his performance.

    • ian wragg
      Posted November 10, 2013 at 4:29 pm | Permalink

      That won’t be the Euro then. I bet there are a lot of Dutch who would welcome Guilders with a picture of the royals on it.
      You can fly the EU flag as high as you want Peter but the truth is the project is on it’s way out and a bit of civil unrest down south will kill it off.

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:10 pm | Permalink

        @ian wragg: While I cite facts (your devaluation) you come up with yet another prophesy of doom for the euro and present it as “truth”?

    • Jagman 84
      Posted November 10, 2013 at 5:59 pm | Permalink

      I hope the Dutch return to the Guilder in the near future. That should give you the reliability you seek. I hate to think that you are fretting over the Euro.

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:14 pm | Permalink

        @Jagman 84: what’s wrong with the euro? It may be a boring currency but I don’t keep 5 purses with different coins in my drawer anymore, apart from not carrying a passport on a train to France, Germany or Belgium.

        • Bob
          Posted November 11, 2013 at 11:58 am | Permalink

          @PVL
          Oh yes, let’s ruin the economies of PIGIS and Cyprus, to make a little spare space in on of Peter’s drawers.

          Did you not know that airline cabin crew will pass it on to a charity for you if you run out of drawer space?

          • Bob
            Posted November 11, 2013 at 12:00 pm | Permalink

            “one of” not “on of”

        • libertarian
          Posted November 11, 2013 at 9:50 pm | Permalink

          So what do you use in Switzerland, Denmark, Sweden and the USA oh other currencies. Hmm does that mean you are in favour of a world currency to cut down even more on your drawer space or do you only visit France, Belguim and Germany?

    • Bob
      Posted November 10, 2013 at 6:10 pm | Permalink

      Nineteen years without having their accounts signed off eh Peter?

      If it were a registered business, the directors would be in clink by now.

      …and you certainly wouldn’t want to be a shareholder.

      • Peter van Leeuwen
        Posted November 10, 2013 at 8:16 pm | Permalink

        @Bob: If you’d know the facts Bob you would realise that this is mainly because of the behavior of member states, not of “Brussels”

        • Bob
          Posted November 11, 2013 at 11:51 am | Permalink

          Extracted from article in the Daily Mail

          The rate of errors increased from 3.9 per cent to 4.8 per cent of spending, a rise of nearly a quarter.

          The European Court of Auditors found that supervision and control of Brussels spending worth another £117billion was only ‘partially effective’.

          The fraud affects all areas of EU spending, the watchdog said. Rural spending was the worst area, with 7.9 per cent of the €15 billion (£12.6billion) rural development expenditure made in error.

          Notice how they refer to “Brussels spending”?

          My point stands, would you invest in a business that couldn’t control it’s spending nor pass an audit for nineteen years?

    • Little White Sqibba
      Posted November 11, 2013 at 11:26 am | Permalink

      The old bank notes never used to have the Sovereign’s head on: they were notes. Now they have become in effect paper coins.

    • libertarian
      Posted November 11, 2013 at 2:35 pm | Permalink

      I do agree with you Peter about the need for confidence in a currency rather than design.

      Sadly since 1971 we have been unable to have confidence in our fiat currencies as they are now totally at the mercy of political and corporate manipulation.

      That is why surrendering even more control to unelected politburo’s who run the Euro is suicide in the long term.

      • Edward2
        Posted November 12, 2013 at 7:17 pm | Permalink

        Indeed Liberatrian
        With debit and credit cards fast replacing cash, it is a complete red herring to say the reason the Euro is useful is it saves you changing your money.

        Anyway before the Euro when I travelled in these border areas the shops accepted cash from several different nearby countries without any problem.

  3. Mike Stallard
    Posted November 10, 2013 at 7:36 am | Permalink

    I cannot understand the Cyprus bit. Surely a currency is a currency?
    There was talk, during the Italian crisis a few years back of people looking at the numbers on the notes, but I don’t think it came to anything.
    Metternich: Europe is a geographical expression.

  4. Arschloch
    Posted November 10, 2013 at 7:42 am | Permalink

    Somebody called the Euro a “silly currency” its shows what they know! Since 2008 it has not collapsed . Instead it has become the currency of other states such as Estonia (2011) with others lined up to follow (other Balts and Croatia), the Chinese are buying lots of it as they diversify away from the US $, its printing presses seem to go at a glacial pace in comparison to the Bank of England’s (remember we are printing faster than the Fed and are only being outpaced by the Japs). Lets not forget its the market that is sovereign, and if you consider a currency to be a sort of share price for a country, then you know just how valuable the pound will be once greater attention is given to our books. It will be then that our Dutch correspondent can have a ginormous smirk on his face!

    • libertarian
      Posted November 11, 2013 at 2:43 pm | Permalink

      Arschloch

      The Euro is a SILLY currency like all other currencies since 1971. Its a fiat currency and if you don’t appreciate how silly that is to let politicians set the value of money then no wonder you think the EU is a good thing.

      China’s State Administration of Foreign Exchange, which manages the country’s $2.4 trillion of reserves, is diversifying away from European bonds. The 20 percent depreciation from last year’s peak in November has demonstrated the limits of the euro as a reserve currency to rival the dollar as well as the European Central Bank’s ability to defend its legal tender.

      Smirk wiped

  5. alan jutson
    Posted November 10, 2013 at 8:01 am | Permalink

    John

    I may be wrong but I thought the Country that issued the notes in the EuroZone had its own particular letter preceeding the serial number, thus a different letter for each Country denoted where it was issued and came from.

    I wonder why they decided on this.?

    Worried about future value ?
    Worried about who may issue more than their fair share?

  6. Andyvan
    Posted November 10, 2013 at 8:18 am | Permalink

    Yes no one can be in any doubt sterling is backed by the full faith and confidence of a group of failed politicians that have systematically undermined, devalued and indebted the UK. Indeed any rational accountant operating with the same standards required in private business would conclude that there has been massive fraud and the country is bankrupt.
    It’s certainly true that the Euro is even more dubious but anybody that believes that sterling is a sure thing is liable to be very disappointed one day, possibly soon.

  7. sm
    Posted November 10, 2013 at 9:22 am | Permalink

    I would suggest that an apt portrait for the next round of EU banknotes would be one of the original Mr Ponzi.

  8. Alan
    Posted November 10, 2013 at 9:27 am | Permalink

    Mr Redwood is talking about paper cash, the form of money favoured, so I have read, by drug dealers, thieves, and tax evaders. I think most high value banknotes do not circulate in ordinary transactions: they are kept in bank safe deposits or in suitcases in the attic, out of sight of police and tax inspectors. I don’t think there is any great merit in having the Queen’s portrait on banknotes that are put to such purposes.

    I think we should cease to issue all high value notes (as indeed we have already stopped the use of the €500 note, since that was hardly ever used for legal transactions), and expect people to use debit cards and credit cards for all transactions. Banks should be prohibited from charging retailers or customers for using debit cards.

    I think that what is printed on a banknote should be irrelevant to our sovereignty.

  9. Martin
    Posted November 10, 2013 at 9:37 am | Permalink

    I suggest you study the history of BofE notes. The present Queen is the only sovereign who has appeared regularly on the banknotes.

    As for the taxpayer backing the note – well we have devalued it well in the last 50 years!

    Regarding Cypriot Banks if a bank goes bust you are lucky if a government guarantees your savings. The UK only guarantees some of your savings no matter how nice the pictures of the Queen on the notes when you paid the money in!

  10. Brian Tomkinson
    Posted November 10, 2013 at 9:37 am | Permalink

    JR: “In due course when they have completed their union more fully”
    Having achieved that they will then move on towards their real goal of political union. What then will be the position of the UK? We will be told that we really have no option but to join the euro and become totally subservient to a foreign power. Anyone who believes in freedom and self-governance for the UK must support our departure from the EU.

    • Denis Cooper
      Posted November 11, 2013 at 1:34 am | Permalink

      Correct, that is the plan, even though JR (no doubt sincerely) affirms that his party is united in principle against ever joining the euro.

  11. Terry
    Posted November 10, 2013 at 9:54 am | Permalink

    Who stands behind the Euro? Why, Germany or course and the DMark is their true currency. To solve the Euro crisis they should return to their beloved and let the “also rans” run at their own pace.

  12. Denis Cooper
    Posted November 10, 2013 at 10:00 am | Permalink

    I’ve been reading a book called “Periodic Tales”, an interesting and entertaining account of the discovery and uses of the elements over the centuries, and last night I’d got to the part about the alleged use of inks based on europium on euro banknotes … the author couldn’t find out who had pushed for the use of inks based on europium rather than other elements which would have served just as well, and the ECB was unhelpful.

  13. Acorn
    Posted November 10, 2013 at 10:23 am | Permalink

    The ECB stands behind the EURO because the ECB is the only entity that can issue that currency. The big problem is there is no government Treasury to spend the Euros into existence and indemnify the ECB against loss. The ECB central bank, was never designed to be the “spender of first resort”, that is the Treasury’s job in a sovereign fiat currency economy; only it can mint currency. Additionally, most of the latter allow their currency to float in value with other sovereign fiat currencies, hopefully to auto trim its balance of payments with the rest of the world.

    The EU needs a federal Treasury that comes with a federal government, just like the US. The federal government spends the US dollars into existence by buying stuff from the private sector. The FED central bank operates the throttle and the brake with overnight interest rates if things get a bit bubbly. Or with QE to depress long term interest rates if it has to. The individual US states are currency USERS not ISSUERS. They have to borrow or tax to get dollars to spend they are not allowed to ISSUE (spend) new dollars into existence.

    Until the EU gets the above fundamentals of a fiat currency system; and, realises that we no longer use a commodity currency system like gold (G. Osborne please note), the quicker they will realise that they are getting “austerity” arse backwards.

    Remember the only reason we use pounds sterling is because the UK government insists that you pay your taxes in pounds sterling, so you have to get some from the government first, before you can pay tax. The government always spends into the private sector including commercial banks BEFORE it taxes or sells you any of those savings certificates, to put in your pension fund, it calls Guilts.

    Also, for every pound the government spends, it gets a pound back in tax. The trouble is you buggers insist on saving the governments pounds, and it doesn’t get them back for years sometimes. So every year you are making it have a budget deficit. And the government knows exactly how many pounds sterling you are hanging on to, because the number is exactly the same as the so called “national debt”.

  14. margaret brandreth-j
    Posted November 10, 2013 at 10:45 am | Permalink

    There are too many histories and languages for good cohesion. Someone has to be the leader, yet the offense would be great to all members if their own Country was put at a poor 2nd, 3rd etc in terms of ethical / historical priority. Whilst we enjoy working with our European allies we cannot be put into a big pot and lose identity. This may happen eventually, as John Lennon’s “imagine,” but a couple of decades, with an insidious signifier to unity superimposed on difference and centuries of history will not suffice against the rock of ages.

    • yulwaymartyn
      Posted November 11, 2013 at 5:07 pm | Permalink

      margaret – “imagine ” is happening already in London. No need to wait. Its here.

  15. Richard1
    Posted November 10, 2013 at 10:47 am | Permalink

    A problem that needs to get nipped in the bud is what happens if Scotland votes to leave the UK. Mr Salmond says Scotland would keep the £. Fine, but Parliament should put through a law now which says that if that’s the choice, the UK will not enter a currency union with an independent Scotland without a referendum in the UK. Scotland can choose any currency it likes as a unit of exchange and accounting. But UK taxpayers must not be on the hook for Scottish debts or Scottish banks, and the Bank of England should pay no more attention to conditions in Scotland in setting monetary policy that it does to conditions in any other small neighbouring country, Denmark for instance.

    • Max Dunbar
      Posted November 10, 2013 at 10:41 pm | Permalink

      The £ would probably last about the same length of time as the Queen in Scotland – conveniently.

  16. Denis Cooper
    Posted November 10, 2013 at 11:29 am | Permalink

    Be careful about knocking the euro, JR; remember that those leading your party still want us to join it.

    Not immediately, of course – even the Liberal Democrats agreed that we should not make any moves to join it in this Parliament – but eventually, when they or their successors, or their colleagues in the other two old parties or their successors, can tell us that we have now become “isolated” as one of the very few countries, maybe even the only remaining country, among the thirty-odd or forty-odd countries in the EU which has not yet adopted its currency, and that this is no longer a tenable position and it is clearly in our national interests to join the euro alongside our EU partners.

    Remember that in May 2010 Osborne agreed with Darling that the UK would participate in an illegal arrangement to bail out Greece in order to prevent the disintegration of the eurozone. During their conversations he could have said:

    “Alistair, I cannot agree to us getting involved in anything that breaches the treaties; as a minister I will have a duty to obey the law, and if you do agree to anything that I believe is illegal then when I take over as Chancellor in a few days time I will have no choice but to immediately repudiate it.”

    But obviously Osborne didn’t say that; instead he went along with the illegal arrangement agreed by Darling, because for both of them saving the eurozone was far more important than observing the treaties as approved by Parliament.

    Remember that Hague talked about the eurozone as being “a burning building with no exits”, but he never proposed that an exit should be created; even when the Dutch Prime Minister did suggest that the EU treaties should be changed so that a country could make an orderly exit from the euro without having to leave the EU altogether he found no support for his proposal from Hague or Osborne or Cameron at that time, and of course he has since been induced to resile from it by Merkel who has openly declared that all EU member states should join the euro, and making no exception for the UK.

    Remember that when the Tories’ “allies” in the Czech Republic publicly stated that they wanted their country to be relieved of its present legal obligation to join the euro they found no support for that from those leading the Tory party; and why should indeed they should have expected any support from that quarter, when it was Major, still influential in the upper levels of his party, who had agreed at Maastricht that all new EU member states must accept the legal obligation to join the euro under their treaties of accession, so that legally every enlargement of the EU must automatically be followed some years later by a corresponding enlargement of the eurozone.

    And remember that the Act which is supposed to guarantee a referendum before we could join the euro is not in any way entrenched against normal repeal, so a future government of whichever party or parties could easily avoid holding a referendum if it preferred not to take that risk.

    Reply I can assure you the Conservative party is united in principle as against the UK ever joining the Euro.

    • lifelogic
      Posted November 10, 2013 at 8:47 pm | Permalink

      To Reply “I can assure you the Conservative party is united in principle as against the UK ever joining the Euro.” but they can an will change their minds if it suits them.

      But no one can trust them an inch can they? They promised to raise IHT thresholds to £1M and have now said no change until 2008 (not even a promise for 2008). Cameron made very high profile “Cast Iron” promises (to obtain votes by deception) only to rat on these very shortly afterwards – with the untrue & totally pathetic/transparent fig leaf – that a treaty is “no longer a treaty” when ratified – it is part of EU law so the promise no longer applied. Who did he think would swallow that one?

      It is all irrelevant anyway, the party will come third to UKIP in 2014 and surely become history in 2015. A tragic waste of the sitting duck opportunity Cameron had in 2010, but threw away with his lefty, enforced equality, fake green, big state, high tax, pro EU, modernising drivel. Just at a time when the country was crying out for a real Tory government, tax cuts and a halving of the largely parasitic sector.

      Miliband will be worse, but not very much, and at least we will not have to watch Cameron smugly ratting on his party supporters for a second time.

      Reply IHT changes were blocked by Lib dems, no offer of a referendum was made in the 2010 Manifesto, I think your dates on IHT are wrong.

    • Denis Cooper
      Posted November 11, 2013 at 1:40 am | Permalink

      Well, Kenneth Clarke is one obvious example of a senior Tory who is not united against ever joining the euro, and there are others; but in any case I did write “or their successors”, and there is no telling who will be running the Tory party in the future or what their attitude will be.

  17. Tad Davison
    Posted November 10, 2013 at 11:39 am | Permalink

    I couldn’t much care less who the Europeans have – Charley Magne or whatever his name is, but whilst reading a few things related to today’s topic, I found this which could help the debate along:

    (item deleted as it makes false allegations re the Bank of England, which is an arm of the state owned by the state ed)
    Tad Davison

    Cambridge

    • Tad Davison
      Posted November 11, 2013 at 6:12 pm | Permalink

      A bit harsh John, but I accept you do need to be careful these days so I won’t hold it against you. These things are easily accessed independently though if anyone wishes to take a look, and sometimes, one unearths a few nuggets.

      Tad

  18. David Hope
    Posted November 10, 2013 at 12:36 pm | Permalink

    I couldn’t really care less if a banknote has the backing of x or y. Really what you mean here is of course “Does government debt have the backing of the central bank?” There is nothing stopping Greece taxing people to prevent its debt.

    And the answer frankly is that government debt should not be backed by the central bank. There was no requirement under the gold standard for one country to back another in debt. Personally I’d have Greece default, rather than doing it by the backdoor with money printing, which causes many distortions through its implementation.

    The problem with the Euro is not one of who backs it necessarily, more than we have a single fiat currency and central bank setting interest rate and bank reserve policy that can’t fit all countries. Combined with the euro area settlement system it has allowed massive imbalances to build up. Had we got a much harder currency these imbalances could not have arisen.

    I don’t think that saying, look the UK can print money when the whole system from government to private sector is totally over borrowed and leveraged is a good thing! Really we should concentrate on not getting into such a situation

    • Tad Davison
      Posted November 10, 2013 at 9:46 pm | Permalink

      ‘And the answer frankly is that government debt should not be backed by the central bank’.

      We ought to have a frank and open debate about the workings of The Fed one day if John would permit it. Both Eisenhower and Kennedy warned about its workings, and Woodrow Wilson apologised to the American people for allowing its inception.

      The Fed has a lot of influence throughout the globe, so is a legitimate topic of discussion, and a view of (an alternative view ed) might change a few attitudes to banking, and central banking in particular.

      Tad

  19. forthurst
    Posted November 10, 2013 at 5:28 pm | Permalink

    The history of the European continent is that of nations and empires and principalities. Europe as a country, still nascent, must have its own iconic buildings and Founding Fathers. If Brussels is the capital of Europe, what buildings can it offer to grace Euronotes? There’s Burlaymont (etc ed) of luminaries, Europe has had an abundance, Jacques Delors, Edward Heath, so many to choose from. If one were to pick a distinguished European from the past, surely Richard Coeur De Lion, Angevin emperor, would fit the ticket; with his very mixed European ancestry and neoconservative principles, he was the epitome of modern European man (in most respects).

  20. Lindsay McDougall
    Posted November 10, 2013 at 5:41 pm | Permalink

    Who is the Euro zone sovereign? Herr von Rumpy Pumpy of course. Feeling happier?
    Do we want his mug shot on Euro notes? No doubt it’s none of our business, but would Euro area citizens want it?

    • Bob
      Posted November 10, 2013 at 7:47 pm | Permalink

      @Lindsay McDougall

      Who is the Euro zone sovereign?

      Perhaps it should be President Von Rumpy’s head on the front side and Baroness Ashton’s on the backside.

  21. Mike Wilson
    Posted November 10, 2013 at 6:12 pm | Permalink

    Surely the idea being advanced here, that our currency somehow has more inherent ‘worth’ or ‘integrity’ is misconceived. A bank note is a piece of paper used for convenience to represent value. History shows that in times of crisis, its representation of value disappears and it turns into a valueless piece of paper.

    If a sterling note has ‘has the backing of the taxable capacity of the UK state’ – does it, somehow, include the fact that, do date, taxpayers collectively owe about 1 and a half trillion pounds.

  22. uanime5
    Posted November 10, 2013 at 6:45 pm | Permalink

    So far it seems that whichever eurozone country your money is in is responsible for the euro. As a result if you have your money in a country where the banks go bust the state has to compensate you. If the state doesn’t have enough money to do this then under EU law you’re guaranteed the first €10,000 and a percentage of anything above this (how much you get depends on how much the state can pay).

    • Lindsay McDougall
      Posted November 12, 2013 at 3:59 pm | Permalink

      You’re missing something. RBS and HBOS didn’t go bust. If the State hadn’t supported them, their shares would have crashed dramatically but they could have protected depositors. The fact that the State intervened to buy up their shares at an inflated price (compared to their actual worth) meant that taxpayers took the hit instead of shareholders.

  23. Mark B
    Posted November 10, 2013 at 8:19 pm | Permalink

    I would say, that you need to put the questions you raised to the German Chancellor and the people she represents. All the others are bust and will do as they are told because, one phone call from her and your out ! eg The Greek and Italian Prime Minister’s.

  24. Gary
    Posted November 10, 2013 at 9:36 pm | Permalink

    it’s all irredeemable fiat paper backed by nothing. Whosoever has their head or stars on this paper won’t save it. It is destined to go the way of the Dodo as sure as the sun rises.

  25. Roy Grainger
    Posted November 11, 2013 at 7:45 am | Permalink

    You neglected to mention that the notes also have a code letter which tells you which EU government issued them. During the Cyprus crisis some people were insisting on receiving only those notes issued in Germany rather than Greece.

  26. Neil craig
    Posted November 11, 2013 at 10:31 am | Permalink

    There was a bit of a scandal when it was found that not only were most of the pictures of bridges lifted from 1 book but that many of them weren’t European bridges.

  27. John Wrake
    Posted November 11, 2013 at 11:44 am | Permalink

    Why is it that no-one on this site, poster or commentator, mentions the Bradbury Pound?
    Why will no-one in the House of Commons, especially those with experience in financial matters, ever mention the action taken by the British Government and the Bank of England in 1914, in response to the threat posed to the currency by the outbreak of WW1?

    Is it ignorance, or malevolence or malign influence which has closed mouths?

    John Wrake.

    • Denis Cooper
      Posted November 11, 2013 at 3:56 pm | Permalink

      People who do talk about the Bradbury Pound usually forget, or deny, that since it was nationalised in 1946 the Bank of England has been publicly owned, specifically owned by the Treasury, which was not the case in 1914.

      It has been mentioned before on this site, for example back on May 25th here:

      http://johnredwoodsdiary.com/2013/05/25/the-imf-report/

      you will find that my comment had this section:

      “There is now another load of timewasting nonsense going the rounds about the “Bradbury pound” first issued in 1914, which was issued by the Treasury and said as much:

      “Issued by the Lords Commissioners of his Majesty’s Treasury … ”

      and as so often wilfully ignoring the simple but inconvenient fact that while in 1914 the Bank of England was still a private bank it has long since been nationalised, in 1946.

      So why should the Treasury now wish to start issuing its own new currency, when the Treasury owns the Bank of England and can arrange for the Bank to create more of its usual currency and get it routed to the Treasury via the gilts market, albeit with some minor transmission losses?”

    • zorro
      Posted November 11, 2013 at 6:51 pm | Permalink

      Indeed…debt free currency….Some of us have mentioned it before and governments have used these type of measures in times of crisis (US Civil War, 1914) to avoid usurious interest rates on loans from private institutions…..I suppose that John might say that QE (in a ZIRP world) is effectively the same thing….although not exactly. However, governments have effectively used QE as a tactic to cover their deficit spending.

      zorro

      • Denis Cooper
        Posted November 12, 2013 at 2:15 pm | Permalink

        The arguments put forward about the Bradbury Pound and the greenback are always predicated on the mistaken belief that the Bank of England is still a private bank, and usually part of the myth is that the Bank has secret private owners of a particular religious persuasion who are being allowed to syphon off our wealth.

        There are videos circulated in which US commentators talk about the histories of central banks especially the Federal Reserve, but somehow the history of the Bank of England which they present always ends before 1946 when it was nationalised.

        To be honest I’ve lost patience with those who persist in believing this in the face of all the evidence; I had hoped that when Osborne reclaimed part of the interest which the Treasury had paid to the Bank on its holdings of gilts then perhaps something would click in their brains and they would think that this did not really tie in with the Bank still being a privately owned bank, but apparently not.

  28. theyenguy
    Posted November 12, 2013 at 12:43 pm | Permalink

    You have asked a most important economic question!

    Acting behind the scenes, Jesus Christ, in oversight of the economy of God, that is in the administration of all things economic and political for the completion and fulfillment of every age, epoch and time period, a concept presented by the Apostle Paul in Ephesians 1:10, enabled the bond vigilantes to call the Interest rate higher on the US Ten Year Note, ^TNX, higher from 2.48% on October 2013, pivoting the world out of liberalism’s fiat money system, into authoritarianism’s diktat money system.

    As seen in the Revelation of Jesus Christ, that is the unveiling of Jesus Christ, a dream given by angels to John the Revelator, while living in exile to the Isle of Patmos, in his 90s, Jesus Christ on October 23, 2013, Jesus Christ, opened the First of Seven Seals of The Scroll, Revelation 6:1, containing the details of the culmination of history, Revelation 1:1, which releases the First of the Four Horsemen of the Apocalypse, the Rider on the White Horse, who has a bow but no arrows, signifying his role in effecting a global coup d’etat, transferring sovereignty from nation states and bankers to nannycrats and regional bodies, as they come to rule in regional governance, effecting totalitarian collectivism, in each of the world’s ten regional areas.

    Liberalism was the era of democratic nation state and banker sovereignty. But authoritarianism is the era of beast regional governance and totalitarian collectivism sovereignty, ruling in each of the world’s ten regions, and in all of mankind’s seven institutions, as presented in Revelation 13:1-4.

    Jesus Christ has designed the beast regime to be the ultimate predator, having feet of a bear, the mouth of a lion, and camouflage of a leopard. It’s feet have emerged in the European banking supervision system run out of the ECB in Frankfurt Germany; its feet enable the monster to stand upright against all enemies, as well as to run down and trample all naysayers; and its claws enable it to root out and tear apart all opposition.

    With the death of fiat money, one no longer has economic life in investment choice but in nannycrat diktak, as regional integration, is the dynamo of regionalism; which is replacing global growth and trade, which was globalism’s dynamo of crony capitalism, European socialism and Greek socialism.

    As the beast regime rises out of sovereign crisis and banking crisis in the Eurozone, a New Charlemagne, foretold in Revelation 13:5-10, will rise as Europe’s Sovereign.

    And a New Monetary Prophet, Revelation 13:11-18, most likely Mario Draghi, will rise as the EU’s Seignior, that is top dog banker, who taking a cut, mints money.

  29. petermartin2001
    Posted November 12, 2013 at 1:41 pm | Permalink

    The Euro looks increasingly an experiment set to fail. The separation of fiscal and monetary responsibilities, one by the National governments of the EU, and the other by the ECB, is proving a recipe for disaster.

    The Euro looks to have been designed to suit Germany and no-one else. There would have been a similar problem if the Eurozone had adopted the old Deutschmark or had been forced to peg their national currencies to it.

    The lesson of Black Wednesday should not be forgotten. One country – one floating currency is what we know works. The Euro could work if Euroland did become one country, with a common fiscal system, but political realities would prevent that happening any time soon.

  30. PeterMartin
    Posted November 13, 2013 at 12:52 am | Permalink

    “When it came to Cyprus, the answer was the rest of the EU did not stand behind the Cypriot Euro if you held it in one of the wrong banks.”

    That’s true but it is possible that the same problem could arise with the £. A bank, outside the jurisdiction of the UK could offer accounts denominated in £. If the bank then defaulted or account holders were subject to high confiscatory taxes, they would lose their money in just the same way. UK taxpayers would be under no moral obligation to offer compensation.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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