“We are here today against an alarming backdrop of an illegal unjustifiable invasion of sovereign Ukraine, high inflation, electricity and energy price rises, a climate catastrophe, increased food insecurity and a fast emerging cost of living crisis.”
(Roberta Metsola, President of the European Parliament; Introduction to the “State of the European Union” speech, Strasbourg 09/14/2022)
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All of us in Europe – and around the world – are facing the greatest crisis since World War II. As the President of the European Parliament, Roberta Metsola, pointed out in her introductory words to the “State of the European Union” speech 2022, this crisis has an extraordinarily multiple character.
The causes of this multiple crisis are manifold. Simply attributing them to Russia’s “special military operation” in Ukraine (in violation of international law) will not help. Rather, in this multiple crisis, we should remember the saying during Bill Clinton’s administration: “It’s the economy, stupid!” I prefer to understand “economy” in the tradition of the Austrian school of economics according to Ludwig von Mises: “Economics is the study of human action.”
Our current “human action” shows that we are reaching our limits in all possible areas. Right now, in Ukraine, these limits are being negotiated, and that happens stupidly by war. This brings us to the core problem:
Our biggest problem right now – and thus also reason for every war – is that nobody knows what “money” actually is. We know what 1 US dollar is worth in euros, we know what 1 euro is worth in Swiss francs and we know what 1 Swiss franc is worth in gold. But what is “money”? “Money” is nothing more than a currently established relationship between two values. But this relationship can change at any time, anytime and instantly.
On August 15, 1971, US President Richard Nixon terminated the “gold standard” (in violation of international law). From that day on the US dollar has no longer had a guaranteed value. This wouldn’t be so bad if the USD weren’t the basis of every commodity deal on earth. But since then we have been living in global dependence on the USA.
The first consequence of this violation was the Yom Kippur War, and the last so far was the war in Ukraine. It’s about nothing else than the raw material reserves of the whole world. And since August 15, 1971, Washington D.C. controlled all these, politically by the US government and economically by the Federal Reserve.
While the US controls the price of all commodities on earth, the rest of the world pays this price. Starting from Latin America, through Africa, the Middle East and Asia, to Japan – and of course Russia.
Since the early 1980s, since the administrations of President Ronald Reagan in the US and Prime Minister Margaret Thatcher in the UK, since the economic policies of “Reaganomics” and “Thatcherism”, all possible restrictions on “the markets” have been gradually removed.
What was a blessing for some was a curse for others. The fall of the “Iron Curtain” and the collapse of the Soviet Union was followed by the ruthless exploitation of the “East” by the “West”. Even today, for example, teachers in Bratislava, Slovakia, earn only half the money of their colleagues in neighboring Lower Austria – and only a quarter of their colleagues in Switzerland (Source: salaryexplorer). The abyss of neoliberal prosperity runs straight through Europe – and right through Austria, my home country.
Reagan’s and Thatcher’s “neoliberalism” was well-intentioned and initially had its undeniable successes. But in politics and business, as everywhere else, the old principle of Paracelsus applies: “Poison is created by dose.” What initially worked brilliantly in the beginning was doomed to failure in the end. The “liberalization of the markets” has failed since the financial crisis in 2008 at the latest. Today, almost a decade and a half later, we are facing the catastrophic consequences of this approach all over the world.
The “financial crisis” 2008 made it obvious that the value of the USD is completely virtual. We owe the fact that Europe did not yet have to pay the price for this arbitrariness to the European Central Bank under its President Mario Draghi. The ECB not only saved Greece, but also saved all of Europe from the fate of Japan and thus economic collapse. Japan has been paying the price for the fall of the Soviet Union with its deflation up to now.
Opposite of the deflationary commodity consumer Japan we can economically watch the inflationary commodity producers: Iran, Iraq, Libya, Syria and Venezuela. All of them opposed the arbitrariness of “money” in form of USD, most recently Russia too. Only the Gulf States, led by Saudi Arabia, are fine. Now we Europeans are paying their price. And that brings us to Ukraine.
On February 24, 2022, the Russian Federation under President Vladimir Putin invaded its neighbor Ukraine. Why? Now, as “the West” does, one can regard Vladimir Putin a (megalomaniac) criminal. I just doubt that this view will lead to peace because it does not change the problem. (Were George W. Bush, Tony Blair, and Barack Obama also megalomaniac criminals?) What’s the real problem behind? The real problem is that our “money” has no value. And we in Europe are suddenly (?) noticing this ourselves. The onset of inflation is already threatening to turn into social unrest. A conflagration is threatening all of Europe. How do we get out of this?
After Richard Nixon’s breach of contract in 1971, the “gold standard” in Europe was replaced by a so-called “basket of goods” for measuring inflation. With this makeshift solution for determining the value of money, a usable statistical basis had been created. But it didn’t solve the fundamental problem: How much is our “money” really worth? Above all, the “basket of goods” gave us the possibility of an average superficial measurement, but in no case the possibility of (self-)determination of this value. Because global imports were still settled in a foreign currency, everywhere in the world – except in the USA.
In 2012, we presented the then President of the ECB, Mario Draghi, with “The Austrian Definition of Money” in Frankfurt. (https://peterwurm.wordpress.com/2012/08/16/was-ist-geld/)
The idea of the “Austrian Definition of Money” was simple. If “money” is always just a relation, then let’s just take the most basic material relation in the world: water and bread. And with this relation, which is necessary all over the world, a “global basket of goods” was suddenly created which is valid all over the world. One “money” is one litre of water and one kilogram of bread.
1 money = 1 l water + 1 kg bread
Now, ten years later, we are taking the decisive step further. 1 litre and 1 kilogram were physical quantities expressed in SI units of the metric system. But they are even more: they are the basis for the definition of “money” as an absolute quantity that was valid for the first time: “money” is “energy”:
While the equation “money is energy” had previously been reserved for esotericism, we defined “money” as an absolute physical quantity for the first time:
1 money = 3 kWh
The rest will follow by itself. We currently consume 580 million terajoules per year on earth (source: theworldcounts). This corresponds to an average energy consumption of 18,055 kWh per person per year. In “money” terms, that’s 6,1018.33 money individually per year. We don’t have any more “money” available.
Thus we have finally reached our goal. “Economics is the study of human action.” Human action happens under limited resources. But unlike Satoshi Nakamoto’s 21 million bitcoins, these resources can be expanded. (Hence, by definition, Bitcoin is deflationary and unsuitable as a currency.) On the other hand, these resources are not arbitrarily free, as the Federal Reserve’s US dollar wants us to believe.
If USD is the dominant thesis and bitcoin the proposed antithesis, then money’s energy binding is the synthesis. The inappropriate “gold standard” (why should people need gold?) is being replaced by the “bread standard”. The equivalent of “bread” in “energy” is the base that applies to “money” anywhere in the world.
After having set the “economic” base, the “political” question of distribution arises: Who gets how much energy, who gets how much money? Our suggestion is very simple: Every citizen of the world is guaranteed a tenth of the average, which is about 2 litres of (drinking) water and 2 kilograms of bread per day. This will end hunger in the world, and hopefully homelessness (and thus forced migration). How is this funded? How is this guaranteed?
The fundamental problem with the USD system according to Nixon was the arbitrariness of the money function. Simply put, the USD money function had an infinity limit on the upside. (“One can never have enough money”, was once the both ingenious and stupid advertising slogan of a big bank in Austria.) But if the money function in „free markets” has the upper limit as infinite, then it must have the lower limit as zero. In the USD system, hunger and homelessness were necessary(!) because they were immanent. The limit of infinity upwards requires the limit of zero downwards. And so Pope Francis spoke the truth when he wrote in “Evangelii gaudium” in 2013: “This economy kills.”
From now on no more. If we set a limit on the downside at a tenth of the average, then we must do the same on the upside. The resources (“energy”) of this world are limited. And so, by definition, “infinite” is no longer an option. Our energies can be expanded, but are always limited. (That is determined by the four-dimensionality of earthly space-time according to Immanuel Kant and Albert Einstein. “Energy” in Universe is unlimited, but available only in a limited way.)
We set the lower limit of the money function (everyone’s “basic income” from conception to death) at 1/10 x (one tenth of the average). That’s currently around 2 litres of (drinking) water and 2 kilograms of bread per day. So it is most plausible to fix the upper limit of the money function (the maximum net income) at 100 x (one hundred times of the average). A person does not need and should not earn more than hundred times the average consumption. That’s a thousand times the income of the poorest, or currently around 50,000 litres of (drinking) water and 50,000 kilograms of bread per month. Any additional income is taxed at the latest at the end of the year.
No one in the world needs or is allowed to earn more than about 600,000 (six hundred thousand) of money per year. And not less than a thousandth of it either. Everything in between is decided by “the markets”. And now peace on earth becomes finally possible.
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Vienna Calling 
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