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Cheap Money To Extremes: In such circumstances, other nations would have expected the United States to take expansionary steps, for they themselves had a large stake in maintaining high and rising levels of business in a country that provides the largest import market in the world. But, given all the circumstances of the second half of the 1960's, even the United States had to exercise more discretion in its economic and financial policy-making than it had, at times, in the past. Specifically, it could no longer afford to carry cheap money to extremes or to maintain a large federal deficit financed by short-term borrowings.
My children attended schools there and it was cheap at that time, dirt cheap, which explains why we could stay there. We saved a lot of money as against living at home. We could secure two double rooms, enough to shelter the four of us, for two dollars a day in small family hotels. We could secure good nourishing meals for twenty-five cents apiece. Metro fares were one cent. So I and my budget were spoiled.
GRESHAM'S LAW, gresh'amz, in economics, is usually stated as "bad money drives out good." The law stems from the fact that money has a value both as money and as a commodity in the open market. The former value is set arbitrarily by law and is relatively fixed; the latter is determined by supply and demand and varies from time to time, "Good money" has a higher value as a commodity than as money and will disappear from circulation. |
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