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Pastimes : A Jackass, his PAL(indrome), and GOLD -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (97)	1/12/2003 8:56:35 PM
From: Mike M2	Respond to of 1210

M, this passage covers it: Lord Keynes gave the name "Gibson's paradox" to the correlation between interest rates and the general price level observed during the period of the classical gold standard. It was, he said, "one of the most completely established empirical facts in the whole field of quantitative economics." J.M. Keynes, A Treatise on Money (Macmillan, 1930), vol. 2, p.198. And it was a paradox because contemporary monetary theory, largely associated with Irving Fisher, suggested that interest rates should move with the rate of change in prices, i.e., the inflation rate or expected inflation rate, rather than the price level itself. Yet when Keynes wrote, data for the prior two centuries showed that the yield on British consols (government securities issued at a fixed rate of interest but with no redemption date) had moved in close correlation with wholesale prices but almost no correlation to the inflation rate. gold-eagle.com