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Tuesday, November 23, 2010

"The Irrepressible 1930’s"

Should we really worry that Hitler is on the horizon?:

The Irrepressible 1930’s, by Robert Skidelsky, Commentary, Project Syndicate: The just concluded G-20 meeting in Seoul broke up without agreement on either currencies or trade. China and the United States accused each other of deliberately manipulating their currencies to get a trade advantage. The Doha Round of global trade talks remain stalled. And, amid talk of the “risks” of new currency and trade wars, such wars have already begun.
Thus, despite global leaders’ vows to the contrary, it seems that the dreadful protectionist precedent of the 1930’s is about to be revived. ... Substitute China for Britain and today’s eurozone for the gold bloc and the trend of events today has the same ominous feel. ...
The euro will become progressively overvalued, just as the gold bloc was in the 1930’s. Since the eurozone is committed to austerity, its only recourse is protectionism. Meanwhile, China’s policy of slowly letting the renminbi rise against the dollar might well go into reverse, provoking US protectionism.
The failure of the G-20’s Seoul meeting to make any progress towards agreement on exchange rates or future reserve arrangements opens the door to a re-run of the 1930’s. Let’s hope that wisdom prevails before the rise of another Hitler.

    Posted by on Tuesday, November 23, 2010 at 12:48 AM in Economics, International Trade | Permalink  Comments (60)


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