Free exchange: A trio of trilemmas

Posted: July 5, 2013 in economy
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Egypt’s tragedy

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Free exchange


The gold standard holds worrying lessons for the single currency

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EUROPEAN leaders have enjoyed a period of respite from financial turmoil since last summer. But the euro remains vulnerable. Portuguese bond yields soared this week as the ruling coalition fractured. Ireland’s economy has contracted for three quarters in a row. A proper banking union is a long way off. The euro’s fragility is underlined by a new study by Michael Bordo of Rutgers University and Harold James of Princeton University. The two economic historians look at the flaws in another supposedly impregnable international monetary regime, the gold standard, and find reasons to fret about the single currency.
The parallels between the euro and the gold standard are not exact. The single currency is a monetary union with the European Central Bank (ECB) at its apex; the gold standard had no such institution. …

via Economic Crisis


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