The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances.
Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.
American and British authorities were also concerned about violence in an area that harbors a resource indispensable for the functioning of the word economy.
We may be in a rapidly evolving international financial system with all the bells and whistles of the so-called new economy. But the old-economy rules of prudence are as formidable as ever. We violate them at our own peril.
