It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. Henry Ford

Those who surrender freedom for security will not have, nor do they deserve, either one. Benjamin Franklin

The idea that you know what is true is dangerous, for it keeps you imprisoned in the mind. It is when you do not know, that you are free to investigate. ~ Nisargadatta Maharaj

Tuesday 31 July 2018

The CIA’s European secret

Nick O'Connor
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Every day makes more evident the importance of the role which will have to be played by covert operations if our national interests are to be adequately protected.”

Those were the words of US State Department official George Kennan in 1949. He was referring specifically to the urgency of an American covert operation to unify Europe economically and politically.

In other words, to build an early forerunner of the EU.

A United States of Europe, built with US assistance and cash.

There’s evidence to suggest this is true. The CIA may even have been involved. The question I’m asking myself today is: does the EU, eurozone and the modern European superstate exist because the US deep state and intelligence agencies desired it?

It’s a pertinent time to ask that question. If it’s true, how does Donald Trump, supporter of Brexit, trade barriers and national borders and anti-EU fit in?

Yesterday evening Trump and Giuseppe Conte gave a press conference in which their alignment on key European issues became even clearer. You could describe both men loosely as eurosceptics. Though that term means different things when one runs a country in Europe and the other doesn’t.

Conte praised Trump for his “positions and stances which are expressed with clarity”, among other things. There’s obviously a connection between the two. We’ll discuss what that could mean in a second.

But first, post-war Europe.

An economy in ruins. A fractured political establishment. Millions dead or displaced. Against this backdrop the US sought to rebuild Europe – using American federalist ideas, institutions and political structures.

The conduit for this project was the American Committee on United Europe (ACUE), which was organised in 1948 by Allen Welsh Dulles.

That name may be familiar to you. Dulles went on to become the first civilian head of the CIA. They even named an airport after him just outside Washington. I’m not sure how much of an honour that is. Though I’m judging that by the quality of the bars in the airport, which is perhaps unfair (they’re awful).

The connections between the ACUE and the US intelligence community go deeper than that. But the historical what if I’m pondering is – would the modern European superstate exist today were it not for US covert operations and cash back then?

It’s hard to say. From a US federalist point of view the project worked. The US exported American ideas on markets and politics to Western Europe. Then it exported actual American goods and set up American-dominated military-political institutions (NATO).

But what never happened in Europe was the formation of a genuine United States of Europe. That’s actually what’s caused many of the imbalances and tensions between nations on the continent today. You have complete integration in some areas (like trade and monetary policy) but not in others (fiscal policy).

That leads to the situation we discussed yesterday regarding Target2 balances. If you missed my piece, here’s a link back to it. Compare the imbalances between Italy and Germany to those between California and Florida. Or England and Scotland, for that matter.

There are imbalances. But those imbalances can be relieved and netted off against one another within a union or federation that combines fiscal, monetary, political and economic elements. In Europe no such singular institution exists to relieve the pressure.

If that sounds like an argument for a United States of Europe, it’s not. It’s an argument against an elite forcing some of those elements (a shared currency) on the population without thinking through the consequences, and without the popular support on the ground to build the system out in full.

I’ve said it before. But it bears repeating. Building a system in which pressure constantly and inevitably builds with no real release valve is a recipe for disaster. Worse than that: it’s a blueprint for economic Armageddon. I’ll come back to this tomorrow.

After writing yesterday’s piece, Boaz Shoshan and Nick Hubble carried on the discussion of how (and why) currency unions collapse. One thing occurred to me after those discussions – a lesson from history. And that’s the fact that in several instances in the past, currency unions came apart when the strongest nations left, rather than the weakest.

Two examples: Slovenia and Croatia both accumulated large surpluses as part of the Yugoslav dinar system. They were “winning” internally. But those balances were paid with increased credit rather than hard currency, persuading Croatia and Slovenia to leave. The same thing happened within the Russian rouble system in the early 1990s. Countries like Belarus and Moldova accumulated huge balances (as much as 11% of GDP) with Russia. Russia again issued credit to pay these balances.

In both cases the issue of credit led to inflation and the breakup of the system. But it was the strong realising they’d be better off out of the system, rather than the weak walking away, that brought about that end.

Map that on to today’s Europe and what do you get? You get an economically strong nation like Germany accumulating “claims” within the Target2 system in reward for its trade balances. How long can that last before the Germans realise they’re being ripped off?

That’s the question Nick Hubble is pondering. Perhaps the euro ends when Germany walks away? I have to say I can’t see it. But it’s worth thinking on.

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