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Old April 25th, 2014 #60
Gibson's Avatar
Join Date: May 2007
Posts: 1,718

The 1930s depression was largely caused by the gold standard. The main problem with the gold standard was that every currency was fixed against gold, which meant every currency was fixed against every other currency. Some countries became uncompetitive, unable to export anything, so their currency should have gone down in value, enabling them to export again - but being in the gold standard meant their currency was fixed. Countries which were still competitive were also unable to export, because their uncompetitive customers abroad had no money. The result - depression.

Exactly the same thing is happening now in the Eurozone, in which eighteen countries use the same currency. All the countries in southern Europe find the currency is over-valued, so they can't export, so they're in depression. Germany benefits, because for them the currency is under-valued, so they can export easily and make good profits.

A country needs control of its currency, but using a gold standard, they don't have control.