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Pretty much, yes.

Of course there's a couple of differences too. The most important difference is that Scandinavian economies at the time were not credit economies. Deflation is a problem in a credit economy because it provides unpredictable windfall transfers from debtors to creditors. Deflation in a pre-credit economy isn't much of a problem, because the volume of debtors is not very great, and creditors have already priced in a high default risk.

And indeed the tether to the gold standard involved deflationary periods, and those deflationary periods caused defaults - sometimes even sovereign defaults. But if you have defaults on the same scale (relative to the size of the monetary part of the economy) in a fully monetary economy you'd break it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Dec 25th, 2010 at 05:11:49 PM EST
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