John Dizard, Finacial Times.com, via Bonjour l”Estonie
“For the wisdom of this world is foolishness in God’s sight. As it is written: ‘He catches the wise in their craftiness.’ ” (1 Corinthians 3:19)
You can substitute “wisdom of economists” for “wisdom of this world” – as we have seen over the past couple of years. At the moment, for example, the wisdom of the world is that all is quiet in the euro-area, just as at the beginning of May it was well known that the currency area faced immediate doom.
Last year the wisdom of US economists, most notably Paul Krugman, was that the Baltic states would – apparently as one – descend into an accelerating spiral of disaster if they stuck to their policy of a fixed exchange rate with the euro. As he said in January of this year: “It might seem, given the account I’ve just provided [a ‘vicious circle of deleveraging’] that Latvia or Estonia should do anything possible to avoid devaluation. But that’s not right . . . the deleveraging crisis will be even worse if you don’t depreciate.”
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