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Broad Historical Sweep, But Quite Tendentious
on November 18, 2011
Chancellor provides a detailed and entertaining historical sweep of financial market speculation from the Dutch tulip bubble of the 1630s through the collapse of LTCM in 1998. Throughout, however, he often makes the effective analogue of what recent Nobel Prize winner Chris Sims famously labeled `incredible identifying restrictions.' In the final pages, he comes out in favor of fixed exchange rates. In the final footnote, he favorably cites a Labor MP wrote that the single European currency `is the only way Britain can protect itself from the ravages of currency speculation ...' Sitting in late 2011, amid increasing (reasonable?) speculation that the Eurozone's system of fixed exchange rates may unravel sooner rather later, Chancellor doesn't look terribly prescient.