Never before in times of peace has the subject of money evoked the uncertainty it does today. Although, we live in affluence here in Germany, many people begin to ask themselves whether the value of our money is dwindling away. Cash seems permanently under attack as the media bombards us with theories on the 'End of Cash'.
Concerns about the future of money are not without basis: in many countries, massive restrictions on the use of cash have now become a reality, with India at the forefront. Overnight, 86 percent of their rupee reserves were removed from circulation and declared worthless - is cash in the eurozone next?
What is the future of money - a means of exchange, anonymous payment or an opportunity to hoard wealth? How will we pay in the future? What forms will digitization open up to us? And what forms could be forced on us by the state or circumstances, such as a crisis or catastrophe? Are you prepared if ATMs or online banking no longer function?
Harald Seiz wurde 1963 in Calw in der Nähe von Stuttgart geboren und ist seit 1978 erfolgreich als Finanz- und Vermögensberater tätig. 2011 gründete er die Karatbars International GmbH in Stuttgart, deren Geschäftsführer er ist. Seither internationalisierte er konsequent und erfolgreich die Geschäfte. 2016 wurde ihm die Senatorenwürde durch den Bundesverband für Wirtschaftsförderung und Außenwirtschaft (BWA) verliehen.
OUR MONEY-CURRENT FINANCIAL AND MONETARY POLICIES
First of all, how do we define "money"? "Money is anything that fulfils the primary function of money. As long as it can be used as a unit for calculation, a method of payment or as value preservation, it can be considered money," says the President of the German equivalent of the Fed (Bundesbank) Jens Weidmann, at the Cash Symposium of his institution in 2014. However, one of his colleagues on the bank's Board of Directors, Carl-Ludwig Thiele, broached the subject of one of money's fatal characteristics: "Money, in and of itself, is an illusion, an understanding, basically anything in a symbiotic community, whether village, city or country, which is characterized as a method of payment."1
A wealth of endeavor is necessary to ensure that the value of money does not remain an illusion. The euro, the currency of Germany, and all other currencies of the world, depend on a variety of factors, over which a federal or central bank may have only limited power. The current euro crisis-although the euro remains relatively strong, particularly within Europe-has forced us to see what make up the cornerstones of a healthy currency flanked by a sensible monetary policy: debt policy, inflation, interest rates, the international situation, the state of the banking system, but also the economy itself, to name just a few. There is one factor that is of particular importance, and this was also brought up by Mr. Thiel: "The exchange of goods based on a foundation of monetary payments necessitates, above all, the trust of the people who take money as payment-in the case of bills we are talking about printed paper-who can then use it themselves to carry out purchases. In this way, the trust of the population in the intrinsic value of money is central to the successful functioning of a currency. Independent and stability-oriented central banks are, therefore, an important anchor of this trust."2
In this chapter I will demonstrate, mainly using the example of the euro, what is essential to a functioning currency, and what those functions and forms are. Special importance will be lent to cash. Because cash is not only enchanting and existential, it is also practical, anonymous and, in my opinion, fundamental to an intact monetary system and a thriving national economy. Cash does come with some inherent flaws, though, too. Most importantly, the underlying currency can fluctuate extremely inside and outside a country. I will delve more deeply into all of these aspects, along with their corresponding alternatives, in the following chapters. At its core, the book is about the value of our methods of payments and their different forms.
THE STATE OF THE EURO
Was there a hidden message? A new policy of merciless transparency? Or was it just a careless fauxpas? On the national government's Day of The Open Door in August of 2016, the German Ministry of Finance gave information to visitors on the euro, along with some other things. There were not just the usual brochures, there were also promotional items-in the form of gummy bears! What could be a more appropriate expression of the state of our soft currency?
It's not so funny when you think back on the 9th and 10th of December, 1991. About a quarter of a decade ago the heads of state and government decided to join an economic and currency union at a summit meeting in the Dutch city of Maastricht. The euro, which didn't yet carry that name, was born. The German daily newspaper Frankfurter Allgemeine Zeitung, F.A.Z., published an opinion piece on the anniversary of the euro with the unflattering title: "Helmut Kohl's Questionable Inheritance," writing: "Our dreams have not come true-only our nightmares."
Although the euro still retains many positive aspects: 19 countries don't require currency exchange and their companies don't have to worry about currency risks, anymore-but are the negative aspects balanced out? We still travel to Switzerland, Denmark and Great Britain and the currencies there don't put us off. When traveling, I usually pay with a credit card or withdraw money from an ATM, which doesn't require any extra effort.
Most of Germany's exports are made to the eurozone-however it clearly prevents no one overseas from buying our machines and cars, be it with the dollar, yen or yuan. Also, both of the above examples on export and tourism show that regardless of your standpoint, different currencies with fluctuating rates have their advantages and disadvantages: when the euro is strong, our goods are more expensive for overseas trade, at the same time, it's less expensive to go on vacation outside of the eurozone. Of course, the euro is practical, exchange rate risks have decreased for businesses and retail and the movement of capital has increased enormously within the eurozone. But does that balance out the disadvantages and, above all, the economic and political problems which have arisen from creating a single currency in countries that are completely different?
How did the F.A.Z. describe the currency union? "This was not, and is not, an economic, but rather a political project. Former German Chancellor Kohl saw the single currency as an instrument on the way to the most irreversible political union possible. The economic means, the single currency, was designed to secure the goal of political union."3
Just as the Bretton Woods System also failed as a result of its rigidity years ago (I'll come back to that later), this could also befall the euro, today. Because the individual countries and central banks lack central elements of monetary policy such as being able to devalue their currency, thereby making their goods more attractive for foreign trade.
Here in Germany, before this agreement in December 1991, people wrestled with choosing the right order of the individual steps, the F.A.Z. recalled: "While one set was putting everything on the 'locomotive theory,' in which the single currency of Europe should effectively 'pull' the rest to political unification, others-above all the Bundesbank-didn't think much of this and were pulling for the 'crowning theory': in which a single currency could only be possible once economic and monetary policies were aligned, in fact, only after political union already existed."
This key question was decided, in the end, in the course of history. The German Chancellor, Helmut Kohl, basically bought France's approval of German reunification by giving up the German Mark, thus clearing the way for monetary union. Today we see that political decisions don't cancel out economic laws, in fact, they provide evidence that "political decisions" could also be seen as "factually erroneous."
The European economies function differently in spite of everything they have in common. In their highly regarded book "The Euro and the Battle of Ideas," the German economist, Markus Brunnermeier, the British historian, Harold James and the top-ranking French official, Jean-Pierre Landau, showed that the most important cause of the euro crisis lay in the different politico-economic philosophies of the euro countries. "This disparity is based on cultural difference. On the one hand, you have the countries with Germany at the top who stand for a regulated economy and those, like France, who believe in the blessing of economic intervention. These two philosophies can hardly be reconciled with each other."4
This is not a new idea, of course-quite the opposite-and that's what makes it so bad. The F.A.Z. also had this criticism: "Not only were these differences in economic philosophies well known 25 years ago, the economic facts were plain to see. Shortly after 'Maastricht,' 62 German-speaking economic professors published their first manifesto in the F.A.Z. warning, with basic economic reasoning, against the over-hasty introduction of a monetary union. They argued that the economically weaker countries could no longer devalue when needed with a single European currency, and would be put under much more competitive pressure which would lead to higher unemployment because of their lower productivity and lack of competitive edge. High payments in the form of revenue equalizations would therefore be necessary. In the absence of a political union, such a 'transfer' union would not be democratically legitimized. Further: The monetary union would expose Europe to immense economic tensions, which, in the near future, could lead to a political acid test, thereby endangering the goal of integration. Prophetic words."5
In summary, the F.A.Z.'s outlook is quite devastating: "Large economic divergences between the countries in the European Union, differing politico-economic philosophies, a lack of a political union: these three, very closely connected factors, explain the failure of the euro. A number of crutches had to be installed in the past 25 years to help those in the realm of the eurozone overcome these obstacles."6 The EU Stability Pact, developed sometime later, was set up to maintain the...