Gold, the Euro, and the Sins of the Führer

Greece's still-pending €110bn bail-out has already cost three lives in Athens' riots today. More bloodshed inside Western Europe would make a horrific end for this grandest of grand post-war projects...the crowning achievement of Europe's longest-ever period of peacetime.

But thanks to history – and the very same history that built the Euro, as well – Germany cannot inflate. The rest of Europe, however, cannot do anything else. Sharing one printing press was always unwise. Now it makes UK prime minister Gordon Brown look smart for staying outside. Which really is saying something.

No "single currency" could ever reconcile history, however, because Europe's monetary politics over the last 100 years is cleft right in two. Germany suffered first hyper-inflation...and then madness...before banishing the shame of cattle-trucks packed full of people by promising "Never again!" to wheelbarrows overflowing with bank-notes.

The rest of Europe, in contrast, and especially the PIGS of the south (but also Great Britain, you'll note), got things the other way round. Deflation came first, thanks to the interwar Gold Standard. Victory in Europe was then followed by the victory of soft money. Time and again, devaluation worked magic to rescue over-spent nations from ever settling their debts.More Here