Before talking about the new Drachma, we first have to identify the problem with the current Euro currency system and the old Drachma currency.
Greece uses the central banking model like most countries in the world. This means there is a monopoly on the production of money which is controlled ultimately by……the private banks.
Imagine the central bank monopoly as Toyota having a monopoly in Greece. Everyone in Greece drove Toyota cars and trucks and Toyota ran into financial difficulties which put the supply of parts and cars at risk.
Just like the private banks have gone to the government for bailout money from the taxpayer so Toyota would try to get money from the taxpayer in order to stay in business.
The problem is Toyota’s problems are so big it is not able to supply enough parts to keep the cars on the road in Greece and there is also a shortage of cars because Toyota is not building enough to replace the old cars that cannot be repaired.
This monopoly that Toyota has over the supply of cars and trucks in Greece is causing the country major problems. Goods are not able to be transported, supermarkets are empty, some people cannot get to work, garages do not have parts to fix cars and so on.
You can imagine the problems a country would run into if it were dependant on one company to supply all the transport inside a country. It only takes one company to run into problems and it could massively affect the economy of the whole country.
And this is exactly what we have with the central banking system.
The central bank in Greece has made catastrophic mistakes which has damaged the well-being of the Greek citizens hugely.
But instead of the politicians saying “Toyota’s monopoly is bad, it is not healthy we are so dependent on one company”, politicians in Greece and around the world are saying the Greek people should give more money to Toyota than they do already to keep the company afloat.
Toyota in Greece has run into huge problems caused by mismanagement and the politicians are saying that the answer is for people to pay more for Toyota cars so Toyota can take more money from the people.
The only monopoly I know that the supposedly capitalistic governments support is the central banking system and look at the problems it has created.
What is really worrying is that no politician in Greece is saying to the people we need a new system.
We need to have more car and truck manufacturers in Greece than just Toyota. Greece needs more stability, Greece cannot be so dependant on one company for the health of the country’s economy.
A monopoly of the creation of the currency/cars makes Greece too vulnerable to manipulation and blackmail by Toyota and it also makes the country vulnerable if Toyota runs into problems.
Greece needs more car manufacturers to reduce the power of Toyota and to make sure that there is a steady supply of cars and parts even if one company runs into problems.
Politicians in Greece and the rest of the world are not suggesting an alternative system (except Ron Paul) probably because they have not taken the time to look into alternatives. Why have they not looked into alternatives? Because it is not in their financial interest.
The politicians are a key part of the central banking system, they are looked after by the central banking system, it is not in their interests to rock the boat, plus their power to change things is tiny compared to the power of a central bank.
So how can the new Drachma in Greece come about and how can it be independent from the influence of central banks?
First of all the country has to default on its debt completely.
This will make government borrowing much more expensive in the future but that is a good thing. The government will not be able to spend so much money.
The government then needs to compensate every person that had money in the banks that closed, by printing the new Drachma.
The new Drachma needs to be tied to the value of a commodity for example Gold or Silver.
This will ensure that money cannot be manipulated by a single private company. Gold cannot be created and destroyed and neither can the money that is tied to it. Unlike the current Euro system where Euros are made and destroyed at the whim of the central banks.
Private companies then need to be able to get licenses from the government to start printing and lending the new Drachma.
These new companies will be regulated by the commodity (Gold or Silver). These companies can print as much currency as they want, they can choose whatever interest rate they want but if their customer wants to exchange their Drachma’s for Gold they are obligated to do so by a legal contract.
If the bank is not able to give the customer Gold in exchange for their Drachmas then the currency they have created instantly becomes worthless and the bank will be forced into bankruptcy.
People who have invested in the bank will of course lose their money but this is the incentive for people to choose the good banks over the bad banks. Unlike now where the bad banks are the ones that take money from people who do not even use their services.
Okay, but what about the trade deficit, won’t the Gold run out because Greeks send their Gold to Germany in exchange for products?
To balance the trade deficit the rules, regulations and taxes in Greece will have to be reduced to make the country more appealing to companies.
Service companies so Greeks do not have to import the products and services and manufacturing companies so Greece can take money from people in other countries.
A Greek manufacturer selling to Germany can take the Euros that their customer pays them and buy gold which in turn banks in Greece turn into Drachmas.
The problem with this system?
The government, if the government refuses to deal with the trade deficit then the amount of money in circulation inside Greece will continue to decline until there is no money left.
Greece has a trade deficit of over a billion Euros a month and this is directly down to Greece not being an attractive place for companies to start businesses, especially to businesses which want to export to other countries.
What can be done about the government’s power? It must be reigned back dramatically.
The national government of Greece would have to relinquish control of almost everything except possibly defense and foreign policy. All power must be returned to the Greek city states. The competition between the city states will ensure that the city strate governments do not abuse their power and bankrupt the country and the destroy currency.
The free banking system and a city-states style government would solve the two biggest problems facing the economies of Greece and the western world.