Are the tragedies of the 1920s repeating themselves in the twenty-first century? In the 1920s, an irrational attachment to the gold standard helped cause the Great Depression, as European fears of inflation acted as a deadweight on growth. By the 1930s, economic collapse facilitated the rise of fascism, Nazism and World War II. While the Great Depression eventually broke the gold standard, enabling economic recovery, this would come too late for central Europe.
Ironically, just as in the 1920s, there is a technically easy way out of this predicament: put broadly, the European Central Bank should print more euros, lower interest rates, and so ease the burdens of debtor states. Indeed, nothing requires that the euro as a common currency also be a strong currency.
Dr. Wes Widmaier reflects on the European crisis and what American history teaches us about inflation during a ‘crisis’. Read the full story from The Bull here.