Friday, May 25, 2012

Welcome to the Currency War, Part 1: Iceland and the Tragedy of the Commons

"Think of devaluation as the monetary equivalent of the “tragedy of the commons”. In a nutshell, if everyone owns something, it is in each individual’s interest to grab what they can as quickly as possible, which soon depletes the resource.
With currencies, as with fisheries and sheep pastures, there’s an advantage for those who move first and pain for those who dither. Consider Iceland’s nearly-instantaneous recovery from its epic banking crash:..."

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