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iNow
Post  Post subject: Re: Tariffs vs. Currency Exchange Rates - what's the differe  |  Posted: Sat Dec 01, 2012 5:23 pm
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Summary version: Implementing gold is a bad idea, and history has shown why.


http://www.theatlantic.com/business/arc ... ay/265696/

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Why do bad things happen to good economies? In other words, why do countries that do what they "should" sometimes fall behind countries that don't? The question answers itself. There's a time and a place for orthodoxy, and forgetting that fact usually ends poorly.

Great Britain and France took turns learning this lesson in the 20th century, during the interwar period. It doesn't get much more unorthodox than the aftermath of wars and depressions. Setting aside the unprecedented human catastrophe, World War I left both countries with a legacy of high inflation and high debt. Britain was determined to return to the status quo ante and to return almost immediately, which meant bringing back the gold standard and bringing it back at its prewar exchange rate. France took a more laissez-faire attitude about turning the economic clock back to 1913.

This was a disaster for Britain, and, well, not a disaster for France. Returning to the gold standard at its prewar parity, which Britain did in 1925, meant pushing prices down to where they had been before years of high inflation -- in other words tight money and tight budgets. And that meant high unemployment and high debt due to miserable growth. In contrast, France kept the franc free floating, and, boy, did it ever float ... down, that is. This massive devaluation pushed prices up, which in turn pushed war debts down, in real terms.


There was also this:

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Ideas have consequences, especially when it comes to economics. Britain crucified its economy in the 1920s on a cross of gold; France did so in the 1930s. Today, the Fed has ignored destructive calls to raise rates in the face of high unemployment and low inflation because zero rates just seem perverse, but fiscal policy is where bad ideas are a threat.

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iNow
Post  Post subject: Re: Tariffs vs. Currency Exchange Rates - what's the differe  |  Posted: Thu Dec 06, 2012 1:01 am
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The Economist has a nice piece on inflation today wherein they conclude, "Faced with this trade-off, aggressively courting higher inflation is the best available option."

It's a short article that you can read in its entirety here: http://www.economist.com/blogs/freeexch ... ary-policy

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EARLY this week, my colleague questioned the wisdom of encouraging central banks to raise inflation expectations. Having written (once or twice) on why doing so is in fact a good idea, I thought I'd respond to a few points.

There are a few ways to make the argument in favour of raising inflation expectations. First...

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iNow
Post  Post subject: Re: Tariffs vs. Currency Exchange Rates - what's the differe  |  Posted: Fri Jul 01, 2016 3:47 pm
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Interesting piece I read this morning on the Mysteries of Money and some of the history involved.

https://baselinescenario.com/2016/06/30 ... -of-money/
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To paraphrase Desan, at the same time that the English political system invented the modern monetary system, liberal theorists like Locke obscured it behind a simplistic fetishization of gold. The fable that money was simply transmutated gold went hand in hand with the fable that the economy was simply a neutral market populated by households and firms seeking material gain. This primacy of the economic over the political—the idea that government policy should simply set the conditions for the operation of private interests—is, of course, one of the central pillars of the capitalist ethos. Among other things, it justified the practice of allowing private banks to make profits by selling liquidity to individuals (that’s what happens when you deposit money at a low or zero interest rate)—a privilege that once belonged to sovereign governments.

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