When I see daily reports of the effects of Greece on the world economy, it seems just like Germany in July 1931. When I see it spread to Italy, it seems just like Britain, in September 1931. When I see daily reports of Italian bond yields in the US media, it seems just like news of the Young Plan bonds, which was reported almost daily in the US financial press during 1931. Yes, it’s 1931 all over again.
So what is the solution? I hate to tell you this, but the problem is even harder to solve today than in 1931. Yes, most countries were tied down by gold in 1931 (what Barry Eichengreen called “golden fetters.”) But at least they had their own currencies, which could be easily devalued. Now even that option is gone. And despite all the pain, 70% of Greeks oppose giving up the euro. This crisis isn’t ending anytime soon.
Wednesday, November 02, 2011
History rhymes, 80 years later
Here is Scott Sumner: