I liked this quote from Jim Jubak in a piece on MSN titled “Tear up your paper money”:
“So what is it about money that the leaders of the eurozone don’t get?
Money has been around for a while, and it’s not terribly complicated.
The key element is trust. That was true when money was a piece of metal that you could bite or bounce. Now that money is just a piece of paper, it’s even truer. Today’s money is nothing but trust.
That’s why the euro crisis is so bizarre. The euro is, in theory, one of the world’s great currencies. And yet, as this crisis has demonstrated, nobody actually stands behind it. There is no lender of last resort. There is no “full faith and credit.” There’s nobody on the other end of the promise.
And it’s as if the leaders of the eurozone wanted to go out of their way to prove it. They’ve taken us up to the velvet curtain and then themselves, with a self-satisfied smile, pulled it aside to show us that there is no Great Oz.
And in the process they’ve done major, and perhaps irretrievable, damage to their own currency and to the very idea of money in our time. If you can’t trust the euro, what paper can you trust?”
The key element is trust. Right. And that trust is based on a complex relationship within the society that uses money. Remember, money is always a social construct. And society is bound by private relationships, production, laws and a government infrastructure that helps coordinate and sustain that society. The problem in Europe is that there is no social coordination between their money and their governments. It’s a fragmented situation at best. So the trust is collapsing in the money they use.
The trust is easily restored. The European economy is enormously productive so the base of production backing their money is sound. But the infrastructure around which this money is designed is terribly inadequate to sustain a functioning monetary system….It needs to be fixed. Otherwise, there’s no point having a common currency in Europe and the money truly should be torn up….