There have been unions based on gold or silver, but not on fiat money — money tempted to inflate — put out by politically independent entities."
What Friedman was saying was that prior economic unions were based on honest money. The EU on the other hand was based on dishonest money - fiat currency and fractional reserve banking - right from the start. The difference? The unions based on honest money were done to increase honest trade leading to a better lifestyle for the workers of the union -from whose labor all future economic value is derived- whereas those based on dishonest money are mainly done for the benefit of the elite parasites who install themselves as kings and Caesars to whom tribute must be paid. Tribute is extracted from the people via inflation of the scam ridden fiat currency until the people get wise to the con and send the whole thing swirling down the toilet bowl. Knowing all of the above, Friedman famously predicted that the Euro would not survive its first economic crisis.
To say that Friedman was ahead of the game was an understatement. However, in my view there is no way he could have known about the coming crisis of Euroland without first understanding that the whole concept of fiat currency is a con game. Of course, it is not politically correct to use such coarse language as "con man", "grifter" and "scam artist" when talking about the global elite and so no mention of the real underlying issue was ever made by him. And so let me fill in the gaps that he left open. Friedman knew the Euro could not work over the long term because he knew it was a con job. He knew that as people caught onto the con they would join the con in the ever present human desire to achieve something for nothing. At some point there would become too many con men fleecing the patsies (AKA honest, hard working but economically unenlighted citizenry). When this happens, an economic crisis develops and the con collapses under its own corrupt weight.
Having been fleeced too close to the skin by those who would be kings and dukes and other forms of elite ruling royalty, the sheeple begin to lose their desire to consume which eventually negatively affects productivity. With less surplus value available to steal from the sheeple through guile and cunning, the con men begin to turn on themselves as they in-fight over the dwindling scraps of stolen prosperity. In other words, the cancer kills the body and the cancer dies as a result. That's the truth of it folks. If the body does not flush the parasite then body and parasite both eventually die off. Thus, it's important to find parasites early on before they become so interwoven into the daily operations of the body that there is no way to eliminate them without killing the host ("too big to fail, anyone?).
Recently, John Mauldin wonders if the Eurozone could break up and how that might look. Mauldin has always been a glass half full sort of guy even if his glass has been getting emptier over the last year or so. Thus you can expect him to position a break up as a "muddle through" type event. At the same time it is foolish to just expect that things will end up "badly" and then we will all recover and move on. Things could also end up catastrophically and it could change the entire direction of the human race. Much depends on how badly the people have actually gotten screwed this time around and that is something that is not yet known. The Federal Reserve and other global elite moneymen have been running full out trying to hide the problems because they know that their lives could literally be at stake. If this sounds overly dramatic, consider the likely fate of one Hosni Mubrak who is now being held by the Egyptian people he once served as lord over. They want to try him for corruption and conspiring to kill demonstrators, charges which if "proved" in a monkey court of public opinion could easily lead to a swift hanging a-la-Saddam Hussein. Those are the stakes for all failed kings and Caesars.
Having said all that, I want to get back to Friedman's statement about unions based on gold and silver but not fiat money. The United States was conceived as a union of independent states that revolved around gold and silver as money. It was so important to the founders that this be the case that they specifically wrote in the constitution: "Section. 10.No State shall...make any Thing but gold and silver Coin a Tender in Payment of Debts". They did not allow fiat currency. Heck, they did not even allow paper currency operated under a gold standard. They only allowed physical gold and silver coin to be used as the money of the land. This may seem quaint and backward but the framers of the US constitution knew how little deviations from honesty invariably turn into large ones. They knew that if some path to gaming the system were left open then many would be those who choose to take it and that it would be done to the detriment of the new United States.
So here we are, a couple hundred years down the road. We have no gold standard. We have no real money. Few people hold physical gold or silver. What I fear is that Friedman's intuitions about the lack of viability of unions based on fiat currency -dishonest money if you prefer- will eventually apply to unions that started off with honest money but which were allowed to morph into a union based on fiat money by the complacent and unenlighted populace over time. In other words, how is the USA any different from Euroland with respect to the likelihood of eventual breakup? In my view, the risks are equal and in fact a breakup of the EU is likely to get a lot of disenfranchised patsies in the US thinking the same way.
Along these lines, one thing I have always cautioned to be on the lookout for is if states begin printing their own currency. California is doing this in a fashion today with the issuance of IOUs and Utah has recently reinstalled gold and silver coin as legal tender to compete with Federal Reserve Notes. These things are potentially much more important to the future of the US than many can even imagine and they should be watched closely going forward by those with eyes to see the implications. The next things I expect to see in this progression are Federal attacks on the states (and anyone else) who is/are moving away from the Federal Reserve note. This will be a mistake by the Feds because it will only give the dissenters more global visibility but I suspect that the control freaks and con men at the federal level will have a difficult time restraining themselves in this regard.
