The great debate on a European banking union is largely designed to assuage the fear of markets by pretending a clearly unsolvable problem has a solution – claims Godfrey Bloom MEP

As negotiations grind on, chasing the somewhat ephemeral goal of a European Banking Union, I return to my ‘concrete aeroplane’ analogy – which has proved so popular with undergraduates in the universities where my classical liberal economics and libertarianism are not banned. Why are they all so frightened one wonders? No matter. The analogy is designed to show the absurdity and ultimate catastrophic certain demise of the international banking system.

Most of the decision makers, past and present, in the world of international banking are lay or worse academics. They are, and have been, for more than 100 years now joined at the hip with that most ignorant and disreputable individual – the professional politician. Allow me to join up some of the dots for that equally hopeless creature, the radio and TV presenters who question these members of the unholy alliance on our behalf.

Governments and central banks are the same family. They are not independent. Just because the selection procedure has a fig leaf over it, do not be fooled. The government of the day, regardless of which country it is, wants to ensure mutual back scratching until the prime minister or chancellor move on. It does not matter if it goes wrong, as long as it is not on their watch. The same rules apply to the central bankers. They all scuttle out of office to collect their index-linked pensions before the music stops.

The great debate on banking union is largely designed to assuage the fear of markets by pretending a clearly unsolvable problem has a solution. Of course, it does not. We have an international currency war in full swing. What does that mean? It means beggar thy neighbour. Every politically-controlled central bank – in other words, all of them – is racing to debase their currencies. They do this by printing money and keeping interest rates at zero.

As a fiat currency has no measure save against another fiat currency, this masks the devaluation to the ignorant masses. That is, everyone who is not a central banker. This phenomenon started, at least the post-war phase, with Richard Nixon’s abandonment of the gold standard in 1971. Governments now have un-repayable debts and their citizens are not much better. In the United Kingdom the average debt is £26,000 per adult. Government debt including pension commitments and private funding initiatives is about the same. The UK Chancellor is borrowing £9bn per month just to keep the engine running. This simply cannot last.

Nation states, central banks and retail banks are all insolvent – moreover they are bankrupt of ideas. Locked in a head count style of democracy, addicted to welfare with fractional reserve banking and soft money it can only end one way. The shadow banking system owes nearly €900bn to Germany itself with nearly an 80 per cent debt to gross domestic product ratio that can never be paid.

Not only are the banking union proposals illegal under the treaty, they are almost certainly illegal under the German constitution. The €55bn subscription is laughably inadequate. Deposit guarantee carries the usual moral hazard while the Far East economies quietly accumulate gold. Germany, Finland and Austria want their gold reserves repatriated and have been told they must wait. Why? Because it is not there. Pensioners see their savings depleted. Inflation manifests itself in assets not consumer price index or retail price index – although that is bad enough. Energy, food, fuel, travel and education costs have all but doubled in 10 years but we are supposed to relax because flat-screen televisions and mobile phones have gone down in price.

The whole western world’s banking system is akin to a concrete aeroplane. The overpaid great and good can debate as late as they want in the halls of imaginary power in Brussels – as to the engines, seating, shape and crew the plane is concrete people. It cannot fly. It must crash. And sooner than, I suspect, most of us think.

Godfrey Bloom is an independent MEP, having recently resigned from UKIP, and a member of the Economic and Monetary Affairs Committee in the European Parliament