Another must read piece from John Tamny at RealClearMarkets yesterday:
Why Robert Mundell Is Wrong About the Dollar/Euro — John Tamny
A few choice quotes:
Money in the modern world is a paper concept lacking any kind of definition, so for anyone to assume that inflation and deflation can be whipped through the simple act of pegging currencies to one another is to redefine inflation and deflation altogether.
Money is but a veil, and to assume that fixed exchange rates among paper currencies lacking definition would erase inflation or deflation is the height of naivete.
In my experience, financial professionals and civilians alike continually miss the concept that money is an “idea”, it is not a thing. Human psychology is so strong, so stable and consistent, that an idea like money seems and feels real—we all “believe” in it. But if we all one day just decided to stop believing in money, then money would cease to exist.