Is Europe Repeating the 1930s?

Europe is now replicating the 1930s and the mistakes it made with austerity back then as well outside of Germany. Of course, Merkel has imposed the German view of austerity based on their experience but has ignored the opposite experience of the rest of Europe that led to the 1931 Sovereign Debt Crisis and mass defaults.
It was the year of 1925 when then chancellor of the Exchequer, Winston Churchill, returned Britain to the gold standard. Britain was trying desperately to reestablish itself as the financial capital of the world as if nothing had taken place. Returning to the gold standard resulted in wages being forced down to compete with America. John Maynard Keynes at the time pleaded that this was madness. The pound was overvalued against the dollar by 10% trying to reestablish confidence in Britain but the net result crippled exports and unemployment began to rise and workers engaged in strikes for having wages reduced even though the pound was worth more officially.

This post was published at Armstrong Economics on Oct 24, 2017.