Paul Buitink and Wim Boonstra on money creation and the future of the euro

Paul Buitink recently sat down with economist Wim Boonstra to discuss our money system, the future of the euro and monetary policy. In this video, Boonstra explains that our money used to be much less centralized than it is now. Many regions had their own coins, with large differences in weight and purity. The gold standard then brought a certain degree of predictability and standardization, which greatly benefited world trade. But the gold standard also turned out not to be a sustainable system, as central banks continued to reduce the gold backing. Similarly, the Bretton Woods system fell apart, as we explained earlier in this video.

Boonstra is of the opinion that the sustainability of the euro is not at stake, because the currency generally functions well. Compared to other currency areas, the eurozone has a very good infrastructure for payments. According to Boonstra, we should continue to see this separately from the current inflation. This is mainly the result of external factors, such as high energy prices. Central banks have little influence on this. Moreover, inflation before the introduction of the euro was on average higher than after the introduction of the single currency.

Boonstra is very critical of monetary policy. He believes that the ECB is far too late in raising interest rates, which means that the market is now anticipating persistently high inflation. He also believes that Europe has done far too little to set up a capital markets union. As a result, the euro is still not a fully-fledged alternative to the dollar. In the future, Boonstra sees prospects in a kind of SDR, a currency that consists of different currencies. But will that work?

This contribution comes from Geotrendlines

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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here  to subscribe.