In my previous post on Europe, where I discussed the Euro, types of currency, and the underpinnings of monetary systems, I mentioned that:
Nowadays, currency systems are based on fiat money – money that has value only by government law. The strength of the fiat money is tied only to the strength behind the government’s words. Generally, fiat-money loses value once the issuing government refuses to further guarantee its value through taxation…
There is no Europe that backs the Euro but its largest constituent members, Germany and France. There is no central governing body with the political will to restore the Euro’s standing. If the Euro is going to be fixed, then addressing this imbalance is step #1 before any other steps can plausibly be implemented to cleaning up the mess.
With that in mind, the Germans have now decided to slam suggestions that Europe’s bail-out mechanisms be boosted.
If the goal of the plan is to weaken the Euro, then the Germans are doing an admirable job.