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Yes, that is an extremely relevant distinction. A common market with fixed exchange rates will end up with the countries who are least willing to accept inflation as structural surplus countries, while a a common market with floating exchange rates will end up with balanced foreign accounts or, at worst, the countries most willing to accept inflation as structural surplus countries.

In the European picture, the latter is a much healthier construction, because the pro-inflation states lack the political power - both individually and collectively - to collect on such surpluses. And if the diary's central thesis (that anti-inflation inanity is a luxury made possible by political and industrial power) is correct, then this result will generalise.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Apr 9th, 2012 at 10:09:28 AM EST
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