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Our sacred cow 3

Just couldn't resist the temptation from poking some people in the eye…

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Here is Barry Eichengreen and Peter Temin drawing parallels between today's events and the event of the distant 1930s.As a quick reminder: back then much of the world operated under what is known as the "gold standard" - essentially, a system of fixed exchange rates. Of course, the gold standard also meant that, in response to asymmetric shocks, countries had to adjust via changes in the price and wage levels, i.e. inflations or, well, deflations. But that's all pretty much well known. As it's known that the gold standard didn't end well.

But here is a passage that I found striking:

"But the gold standard was not just a monetary arrangement. It was also an ideology. Depression-era choices were made according to a worldview in which maintenance of the gold standard was the primary prerequisite for prosperity. Policies were therefore formulated to preserve the gold standard, not to stabilise output and employment. Central bankers thought that maintaining the gold standard would restore employment, while attempts to increase employment directly would fail."

It's so familiar, isn't it? Almost seems like history IS repeating itself!

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Komentāri (3) secība: augoša / dilstoša

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G.D. 03.08.2010 15:57
Vispar jau fiat cureencies ari vesturiski "did not end well". Parasti viss beidzas ar paradu eksploziju un no taas logiski izrietoshu inflaciju, sleptiem defoltiem vai kariem. Shii fiat currency epizode tikai tagad ir iegajusi stadijaa, kad meginas pieradit, ka spej dzivot. Rietumvalstis pirmo reizi vesturee ir apnjemushas nostabilizet paradu, reizee neizraisot inflaciju vai protekcionismu. Vai tas izdosies? Redzesim tuvakajos 10 gados, nenemos prognozet, bet vesture apgalvo, ka ne

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Jandžs 03.08.2010 15:09
Dombrovskis diverts our attention to gold as a failed standart in order to suggest that the current standart is still valid if only because the financial and economic collapse must not be thought off as a systems collapse. I suggest that we are in a systems collapse whether the day goes to inflationary or deflationary bugs or eager beavers. There is a new virtual reality dawning, but no one quite knows what it will look like, because "ending well" is not what is happening.

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bio 02.08.2010 11:32
Euro?

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