Post by RS Davis on Nov 6, 2003 23:30:24 GMT -5
[glow=red,2,300]Christopher Mayer Wrote:[/glow] "The world is in permanent monetary crisis," Murray Rothbard once observed (in Making Economic Sense), "but once in a while, the crisis flares up acutely, and we noisily shift gears from one flawed monetary system to another." Monetary systems built on floating fiat currencies are fragile things. Most of the world currently operates under this arrangement.
The only thing worse, in Rothbard’s estimation, was fixed exchange rates based on fiat money and international coordination. Markets are fluid and changing. The government fixed exchange rate is bound to be either too high or too low—with problems in either case. The history of attempting to maintain some fixed exchange rates by international agreement has a long rich history of failure, once again illustrating that government power is no match for the relentless and merciless forces of the market. All of which does not bode well for China’s ability to maintain its own fixed exchange rate against the dollar.
The only thing worse, in Rothbard’s estimation, was fixed exchange rates based on fiat money and international coordination. Markets are fluid and changing. The government fixed exchange rate is bound to be either too high or too low—with problems in either case. The history of attempting to maintain some fixed exchange rates by international agreement has a long rich history of failure, once again illustrating that government power is no match for the relentless and merciless forces of the market. All of which does not bode well for China’s ability to maintain its own fixed exchange rate against the dollar.
- Rick
