【正文】 logic of this law bees apparent when one considers what happens if a country tries to have it all. Suppose that a country, like the members of the European Moary System, were to maintain free capital mobility and also mit itself to keeping its exchange rate fixed, buying or selling its currency on the foreign exchange markets as necessary. Unit Six The Return of Depression Economics — Paul Krugman Could it cut interest rates to fight a recession? Not for long. If France were to try reducing its interest rates below German levels, investors, knowing that the exchange rate was fixed, would see a profit opportunity in the “carry trade.” That is, they would borrow in French francs, exchange the proceeds for Deutsche marks, and invest them in Germany. To prevent this increased supply of francs and demand for marks from driving down the value of its currency, the Bank of France would have to sell marks while buying francs itself. Even if the bank started with tens of billions of marks in its account, it would quickly find those reserves exhausted. At that point a choice would have to be made. France would either have to give up on its attempt to cut interest rates and abandon the goal of independent moary policy, or let the franc drop and give up on the goal of exchange rate stability. Alternatively, it could impose some kind of capital controls, limiting investors’ ability to convert francs into foreign currency. Unit Six The Return of Depression Economics — Paul Krugman The trilemma of international finance forces countries to choose among three basic exchange regimes: a floating exchange regime, which allows plete freedom of international transactions and lets the government use moary policy to fight recessions at the cost of erratic fluctuations。? TEXT A Whiff of the 1930s IN THE SPRING of 1931 Austria’s largest bank, the Credit Anstalt, was on the verge of collapse. The Austrian government could not simply stand by and let it fail, but when it came to the bank’s rescue with large sums of freshly printed domestic currency, the resulting capital flight rapidly depleted Austria’s gold and foreign exchange reserves. The obvious answer would have been to abandon the gold standard and let the currency float. But this solution was unacceptable—not just because a drop in the schilling’s value would magnify the burden of foreigncurrencydenominated debt, but because a currency devaluation would deal a devastating blow to the confidence of a country whose memories of postWorld War I hyperinflation were still fresh. Austria pleaded for help from its neighbors and the thennew Bank for International Settlements, but the offered assistance was too little, too late. In the end, the desperate government resorted to capital controls. Unit Six The Return of Depression Economics — Paul Krugman It is a familiar story to economic historians. It is also astonishingly modernsounding: if the plot does not exactly fit any one of today’s crisisridden economies around the world, it does sound very much like a pastiche of recent events in Indonesia, Malaysia, and Brazil. The main difference now is that financial rescue attempts from the international munity have bee routine. When a country gets in trouble today a SWAT team from the International Moary Fund and the . Treasury quickly arrives on the scene. Suppose, however, that the IMF could use a time machine to send its best money doctors back to that Vienna spring of 1931, but without the ability to offer a huge, noquestionsasked credit line on the spot. What would today’s experts say? What could they tell the Austrians that they did not already know? Unit Six The Return of Depression Economics — Paul Krugman Most modern economists—to the extent that they think about it at all—regard the Great Depression as a gratuitous, unnecessary tragedy. They believe that what might have been an ordinary, fettable recession became a nightmarish slump thanks to the stupidity (or at least the ignorance) of policymakers. If only the Federal Reserve had not been preoccupied with defending the gold standard instead of the real economy。 if only Herbert Hoover had followed an expansionary fiscal policy instead of trying to balance the budget, if only policy in general had not been governed by a “l(fā)iquidationist” philosophy that saw shortrun economic pain a