Ray,
At 06:52 27/02/2012, you wrote:
He's amazing. He must have been listening to the gold
folks. Maybe he reads Futurework. Does he wear the number seven
Jersey? Could a get an economists baseball card?
<http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html?hp>http://www.nytimes.com/2012/02/27/opinion/krugman-what-ails-europe.html?hp
You'll be astonished to learn that on this issue Paul Krugman is
right on both counts. Europe's sickness is not due to welfarism nor
to fiscal irresponsibility. The European countries with the highest
levels of welfarism (though even they are pulling back) such as the
Nordic countries and Germany itself also happen to be economically
competent in trading with China and are thriving. As to fiscal
affairs, all governments are irresponsible to a greater or lesser
extent. Outside of the Eurozone this correlates with the general
standard of living of a country. Inside the Eurozone, the more
fiscally responsible are expected to subsidize the less responsible
so that all share the same standard of living (more or less forever
it would seem).
However, be careful about making jibes against gold. Germany's
Bundesbank happens to have more gold than any other central bank in
the world, except the US Fed. German private investors buy more gold
coins and bullion than any other nationality, except Americans.
(Germany buys kruggerands from South Africa by the plane load, and
Germany is the first country in the world, outside the Arab Emirates,
to have gold dispensing machines in its hotel foyers. I wonder
whether Krugman noticed these on his visit?) It will pay America
enormously, and its dollar, to go back onto the gold standard (which
it left in 1971) when the free market price of gold is high enough.
It will put clear yellow water between itself and the rest of the
world, particularly China, unless all other governments follow suit
as rapidly as possible*. You can be certain that Germany will be a
close second because the gold standard specialists -- the Austrian
school of economists -- are still alive and kicking there (as they
are at George Mason University and a few other economics departments
in America).
(*China is buying gold mines wherever it can in the world, the latest
one under negotiation is the Las Cristinas, Venezuela, the largest
potential mine in South America. The Chinese government are not
investing in this just for the jewellery trade!)
Keith
REH
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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