Friday, June 12, 2009

When Exotic Can Be Toxic

The following insights from the current edition of the Economist should provide some food for thought for westoxicated minds who have yet to emancipate themselves from exotic theories, that is those fads, when they are not mere drivel, that fail reality check day in day out:
  • Cheap currencies serve as a subsidy to exports, but also act like a tax on imports;
  • For small, open economies, it makes sense to tie currencies. Even Milton Friedman, a fervent advocate of floating exchange rates, thought so.
The insights may sound commonsensical, but it does not mean that they must not be drilled into the minds of our policymakers over and over.

No comments: