The archive.

Wide swings in the dollar and mounting protectionist pressure had, by the mid-1980s, revived the dream of governments steering exchange rates by agreement - a dream Haberler treats as more dangerous than the volatility it means to cure. The American trade deficit, he insists, is the counterpart of capital inflows financing federal borrowing when domestic saving falls short, not the product of foreign refusal to expand; the cure lies at home. Using an asset-market approach, he reads the Plaza Agreement and Baker-era activism as politicization of expectations rather than technical correction, since sterilized intervention moves rates only when it signals durable policy change. He rejects a return to fixed parities, target zones, and Group of Seven fine-tuning alike, holding that markets, though they err, err less persistently than politically committed states.

Inflation forced floating on reluctant policy-makers.

Pure free trade is politically rare and even theory admits exceptions to it, so the question Haberler pursues is not whether governments intervene but how. The form decides everything. A tariff is visible, general, price-based, and pours revenue into the treasury; a quota fixes volume by fiat and mints scarcity rents for whoever holds the license; worse still, a voluntary export restraint, like the one pressed on Japanese carmakers, ships that rent abroad. Around the surviving GATT core of most-favoured-nation treatment he charts a proliferating tangle of preferences, origin rules, and discretionary licensing, with agricultural protection, above all the self-contradicting sugar program, as his sharpest case. Where quotas cannot be abolished he would auction the licenses. His liberalism is institutional: rules and transparency against the administrative sprawl of managed trade.

But the élan of trade liberalization of the first 15 or 20 years of the postwar period has evaporated.

Three disorders defined the late-1980s world economy, and Haberler traces each to the same root: not technical malfunction but domestic policy failure. The persistent US budget and trade deficits, matched by German and Japanese surpluses; the volatility of a managed float in which governments pretend to know equilibrium rates and unsettle markets with interventions and communiques; and a debt crisis, opened by Mexico in 1982, that he reads less as a liquidity shortage than as the fruit of inflation, exchange controls, and bloated state enterprises. Rejecting Ricardian equivalence as psychologically false, he prescribes a credible multi-year phaseout of the structural deficit, funded by a stiff gasoline tax, and would leave currencies to competitive markets, contrasting Argentina's squandered decline with Chile's liberalization.

People just don’t think that way. Nobody knows what his future tax liabilities will be, let alone those of his children and grandchildren.

When technical improvements lower prices, does the increased purchasing power of existing cash balances count as saving—and does it justify credit expansion to keep prices stable? In this 1935 comment, reprinted in 1993, Karl Bode and Gottfried Haberler challenge Harrod’s affirmative case by separating deliberate cash accumulation from the appreciation of money already held. Their objection is not to monetary expansion in all circumstances, but to deriving a policy requirement from inconsistent definitions of saving and investment. They also question whether anticipated income growth necessarily induces people to hold more cash rather than spend more freely. This tightly focused dispute offers a concrete lesson in monetary reasoning: an accounting relationship cannot establish how people will behave, and revalued wealth cannot be compared uncritically with expenditure on new capital.