The Wonderful World of Bubbles

In the 1960s, one was probably barely able to imagine these developments, but they began at the time when what are, from today’s perspective, minimal aberrations were not corrected. The largest negative development was, however, not in foreign trade, but the steadily increasing level of indebtedness. It, too, is connected with the abandonment of gold. Although gold cannot prevent credit excesses, it still works as a brake. In the already mentioned 1967 report to the US president on the occasion of Germany’s waiving of its right to exchange dollars against gold, the following remarkable sentence can be found: ‘This arrangement will not give us an unlimited printing press. But as long as we run our economy as responsibly as in the past few years, it will permit us to live with moderate deficits indefinitely.’116 It was known, at the time, that cutting the tie to gold would make ‘unlimited’ deficits possible – it was even the goal! From the perspective of government, it is convenient to get funding as easily as possible. However, is indebtedness in perpetuity desirable for a nation?