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Infectious Inflation

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by Felix Salmon
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Jul 01 2008 12:00am EDT

Infectious Inflation

Barry Eichengreen, via Brad DeLong:

There are now fifty countries in the world with inflation rates over 10%. It's like the early 1930s, but just reverse the sign: back then everybody with their currency linked to the dollar imported deflation; now everybody is importing inflation.
The solution then as now is the same: delink your currency from the dollar.

It's not just the dollar, of course: inflation is picking up in the eurozone as well. And it's only partly US inflation which is being imported: much of the rest is US depreciation. But I do think that it's a bit much to hope that even if both the US and the eurozone are seeing inflation pick up, other countries with much smaller currencies can somehow keep inflation under control.

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