Jon Moulton, the private equity chief, warned a City lunch this week that he feared serious civil unrest. There was, he said, a 25 per cent chance of one of the 15 member countries of the eurozone pulling out of the currency club. That, he said, would be a catastrophic shock leading to a “far greater financial crisis” than the current one.
But thinking is established in this area: we are not without explanations and options. See for example Denationalisation of Money — The Argument Refined, by F A Hayek.
From the cover page:
Diseases desperate grown,
By desperate appliances are reli’ved,
Or not at all.
— William Shakespeare, Hamlet, Act iv, Scene iii
Hayek makes practical proposals for free trade in money and explains:
The purpose of this scheme is to impose upon existing monetary and financial agencies a very much needed discipline by making it impossible for any of them, or for any length of time, to issue a kind of money substantially less reliable and useful than the money of any other.
He considered the proposal “more practicable than utopian European currency” which
would ultimately only have the effect of more deeply entrenching the source and root of all monetary evil, the government monopoly of the issue and control of money.
And his remarks on monetary policy and a common European currency now look prescient indeed. Consider:
On the effects of the adoption of the proposal all I will add at this point is that it is of course intended to prevent national monetary and financial authorities from doing many things politically impossible to avoid so long as they have the power to do them. These are without exception harmful and against the long-run interest of the country doing them but politically inevitable as a temporary escape from acute difficulties. They include measures by which governments can most easily and quickly remove the causes of discontent of particular groups or sections but bound in the long run to disorganise and ultimately to destroy the market order.
Reason has shown and history has proven that the free market is the only successful system for cooperation in a society based on the division of labour. We must find the courage to fix what intervention has broken.