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By Antal E. Fekete


Jeff Frieden is professor at Harvard focusing his research on the politics of international monetary and financial relations. He has been quoted as saying that, if once more on a gold standard, the United States would be unable to respond quickly and effectively to sudden economic shocks. Recessions would be deeper and longer, and the economy would be biased towards deflationary spirals. Witness the fact that the United States, which remained on the gold standard till 1933, had a much longer and deeper recession than Britain which had gone off gold in 1931. If the above quotation by Barron Young Smith (see appendix to my previous paper) is accurate, then the Harvard professor writes his monetary economics while standing on his head. He is ascribing a bad condition to a hypothetical gold standard, but the same condition presently obtains in an undiluted form as a direct consequence of the regime of the irredeemable dollar. The U.S. economy is presently biased towards a huge deflationary spiral in consequence of a long cycle of falling interest rates that started from the level of over twenty percent per annum in the early 1980’s, and still has not run its course. As is well-known, falling interest rates must ultimately culminate in falling prices. If we haven’t seen much evidence of actually falling prices yet, it is because policymakers have made the unforgivable mistake of using the irredeemable dollar as a tool to dismantle America’s industria

Year: 2008
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