- Allistair Mitchell
Tales from the Edict 32 - EU Debacle
Updated: Apr 30, 2021
March 23rd, 2030 is almost as sorry a date for the EU as one could imagine. That was the day the fire that had ignited under cryptocurrencies rushed into the blizzard of paper euros printed by the ECB in the previous 15 years of quantitative easing. Unlike other nations like Britain and the US, the European Union had no real reputational guarantee behind its currency. And because the ECB was the lender of last resort, printing money over 15 years steadily devalued the Euro against every other major currency, who in the same period had halted their own quantitative easing and had tightened their fiscal policy. By 2030 there were just too many euro notes in circulation to be taken seriously as a reserve stock. For the European Trading Bloc and its currency, only its size counted. Bankers outside the EU already shied away from holding significant quantities of euros except for immediate requirements.
The month previously the world had been shocked by the rout of Bitcoin and the like. When the dust settled, there was no one willing to pay for ongoing mining – many were holders of the currency – and tens of thousands of nodes simply shut down. The game was up, and European investors lost an estimated €1 trillion, many wiped out by loans they had taken out to pay for their investments. Banks across Europe were saddled with millions of bad debts that would never be paid. Many called on the ECB for emergency support.
And then it emerged that the ECB had suffered heavy losses itself. Caused by a surfeit of euros and no takers, the bank had taken to buying crypto currencies in order to push euros into the wider market, at the same time as earning a profit on the upward movement of their purchase. It turned out the ECB had lost €250bn, the biggest single loser to the crypto crash. News of this loss was catastrophic to confidence. If the ECB was losing its own money in bad trades, what did it say about the currency?
The euros sank like a stone: 15% in the first week, a further 20% in the next week. Alarm bells sounded around the world. European banks affected by the crypto collapse were left with no one to turn to. The President of the ECB resigned. Dozens of small banks went to the wall, others found safety in being taken over. Europe’s finances were on the verge of collapse and a shaken EU president made calls to London and Washington, pleading for assistance, knowing Beijing had its own problems.
For four days and nights London and Washington were locked in discussions while Europe trembled on its knees. The euro lost 80% of its value before trading was suspended in exchanges across the globe. The world held its breath.