Economists say that intervention works only when markets turn unusually erratic (crazy), as they have done upon reports of the assassination of a President, or when intervention is used to push the markets along in a direction where they are already headed anyway.

A. Do you agree with the statement in the article that Germany had little ability to influence the exchange rate of the Deutsch Mark (DM) The former German currency?

B. Describe how "just the stated intention" to intervene could have a "psychological effect" on the foreign exchange market.

C. Can you think of reasons why a government might willingly sacrifice some of its ability to use monetary policy so that it can have more stable exchange rates?