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The president of the European Central Bank, Jean-Claude Trichet, told Forbes that global governance is extremely necessary if we want to prevent another financial crisis. … It is his belief that through global governance, the resiliency of the global financial system can be assured, noting that ultimately it was governments’ use of taxpayer’s money, equivalent to around 25 percent of GDP on both sides of the Atlantic, that prevented another catastrophic great depression from occurring.

– “ECB president favors global governance,” Forbes, April 29, 2010

It should come as no surprise to the informed observer that the central bankers of the world are now beginning to openly push for global governance. The current plight of the euro has amply demonstrated the untenability of monetary union without political union. Without the power to enforce government policy on Greece, the most the Franco-Germanic mandarins of the European Union can do is threaten to withhold bailout money from the International Monetary Fund and the EU member states. This impresses the Greek political and financial elite, but no one else in Greece, and violent protests are already erupting across the country at the mere mention of IMF-imposed financial austerity measures.

For, as one young Greek man correctly asked, why should the youth of Greece be forced to pay for the financial misdeeds of their parents and grandparents? They did not borrow money from anyone. They did not spend it, and they did not participate in the long orgy of financial excess that led to the present default crisis. The consequences of sovereign default are of little concern to them. They are only a threat to the banks around the world that loaned Greece the money it can no longer afford to repay – and the governments that have made themselves liable for those banks. And the warnings of depression in the event of default are meaningless to those living in a society facing the brutal austerity measures of the sort the IMF is attempting to impose.

If one looks back at American monetary history, two things become very clear. First, paper money and debt-money systems always fail in a relatively short period of time. There is no record of either form of monetary system ever surviving as long as 100 years. Most don’t even last 50. The Federal Reserve is the fourth central banking system the United States has known; the other three either collapsed or were shut down by the government after inflating the money supply to the extent that the financial system was collapsing. And the present dollar system is very, very different than the gold-backed currency it was back in 1913; it has only survived thanks to its evolution over time.

Now that the financial system is once more on the verge of the structural collapse that was always inevitable, the usual solution has been proposed. Instead of starting over with a more rational and sustainable system that is less amenable to inflationary abuse, the international bankers are attempting to kick the problem upstairs through further centralization. This is how they always prefer to solve these structural problems, because it allows them to continue to profit by virtue of their control of the money supply.

There are two major problems with this. The first is political. It is impossible to further centralize the issuance of money in the United States, so the only way to avoid either default or hyperinflation is to introduce a new currency at a supra-national level. This would involve such a massive sacrifice of national American sovereignty it is unlikely that even the most enthusiastic pan-globalist politician would contemplate openly supporting it for a second. And, as the Greek euro crisis has shown, this probably wouldn’t resolve the matter anyhow.

The second is economic. Since the problem is too much debt that cannot be repaid, rejigging the global currencies to make debt service easier is not going to make the debt go away. It might make it a little easier to make payments for a short time, but without eliminating the debts through default, all it would do is delay the inevitable for a while longer. As the new Arizona immigration law shows, the mood of the American public is already verging on secessionist over a few million Mexicans illegals. There is absolutely no chance that they are going to tolerate a federal government attempt to merge itself with France, Germany, the United Kingdom and China, among others, just to keep Wall Street from having to face the consequences of its foolish actions.

Mr. Trichet is wrong on several levels. His view of the recent past is incorrect. The massive outlay of government expenditures by Washington, London, Berlin, Paris, Tokyo and Beijing has not prevented another catastrophic Great Depression from occurring. It has merely delayed the beginning of the second act, which looks as if it will begin this summer with a series of sovereign European debt defaults. It is impossible to say precisely what the result of these defaults will be, except to note that throughout history, economic depressions of this magnitude are traditionally accompanied by civil unrest, disease and military conflict.

His solution is demonstrably incorrect, as well. Because this situation was caused by the centralization of credit and political power, it is ludicrous to think that further centralization of either can possibly make things any better. The market forces are rather like gravity; they can be resisted for a time but they will always triumph in the end. And the longer one manages to hold them off, the more brutal the eventual plunge back to economic terra firma will be. The fatal flaw in Mr. Trichet’s call for global governance isn’t that the costs are too high, although they most certainly are, but that it would actually increase the potential for worldwide economic disaster rather than reduce it.

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