Stats for nerds
2recommend
9mentions
5people
2008–2025years
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Mentions per year
What Hacker News says
- This is a truth accepted by economists of basically all political persuasion at this point. The best book on the subject is Barry Eichengreen's "Golden Fetters", but you can get a faster sense of things by going to NBER (nber.org), searching for "great depression" or "gold standard" and walking through the results.
- Barry Eichengreen's excellent book "Golden Fetters" actually demonstrates very convincingly using cross-national time series analysis that economic recovery across the world began on average around six months after countries left the gold standard. This is now the mainstream understanding of the Great Depression in economic history.
His sample size is something like 30-35 countries, and shows clearly that countries which stayed on the gold standard longer suffered more deflation and higher unemployment than their counterparts who abandoned it early. So Bloomberg is in fact correct on this point. And it may also be worth noting that the observed changes are about as instantaneous as you get in economic policy, given that even today changes to the Fed rate are assumed to hit the economy with a six-month lag.
- Gold was the transmission mechanism for international deflation during the Great Depression. Recovery started in country after country roughly six months after abandoning the gold standard. Countries which depreciated/unpegged their currencies recovered much faster.
Large sample regressions with graphs, detailed timelines and other supporting data in Eichengreen's Golden Fetters.
- Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research, but there is a reason no-one will take you seriously if you do.
I personally haven't met anyone who has argued for the gold standard and has read it although that may be a comment more on the academic backgrounds of the people who used to write pro-gold stuff and stuff it into my inbox back in college than the theoretical basis of the argument. So while gold may have a place as an investment (especially as a hedge against inflation) in large part people who spend considerable breath on extolling its virtues using words like "intrinsic value" and "stability" and "natural" are kooks. Their choice of the word "natural" is also odd since gold coinage is hardly more natural than paper and in fact is less easy to control the asset base.
When economists talk about not repeating the mistakes of the 1930s, they are by and large talking about the importance of maintaining liquidity in the system to prevent deflationary spirals, and avoiding liquidity traps. They are also cognizant of Keynes' proof that Say's Law does not work once people want to start doing things like holding liquid assets, and the dismal performance of things like the zero-inflation policy in Canada and other countries through the 1990s.
I'm amazed by the number of Internet libertarians who have jumped on this bandwagon.
- During a massive global downturn many did austerity. Partly because not every country can just infinity take on more debt. You also have to understand that in that time, debt was used as a political weapon, France didn't want to take on debt, because its debt was used by the US against France diplomatically both in 1919 and 1923, France wanted to prevent that from happening again.
You could stay on the gold standard and do austerity or not. Or you could leave it and do austerity or not. All these four are options and different country picked differently for various reasons.
The US under Hoover and FDR first practiced limit stimulus under gold and then left, and continued stimulus even more so. Actually they always did both as tariffs can be seen as type of tax, but that's debatable. And FDR was of the 'throw spaghetti at the wall and hopefully something works' type.
Germany stayed and did austerity. They couldn't leave the gold standard as it would make it even hard to pay back debt. Adam Tooze pointed this out on his commentary on "Golden Fetters". If somebody would have lent them a lot more money if they had wanted to do a massive stimulus program is questionable, the terms would have been harsh. So its understandable they didn't want even more high interest debt.
Its also the case that those that left the gold standard instantly saw the situation get better and therefore saw less need for austerity. So that plays into it as well. The US had its fast historical growth in industrial out put ever the few month after it left gold (that then collapsed the NRA was adopted). So Britain who left gold early recovered better and didn't have to be as extreme.
That said, in the minds of many at the time the gold standard and prudent physical policy were linked. In Japan for example, balanced books and gold were seen 'womanly' a true warrior didn't give a shit, just go and steal that shit. So you tended to have liberal and centrist being pro austerity and pro gold standard. While right wingers hated gold standard (its internationalism) and wanted massive military spending. They didn't care about debt because they would simply take over and steal everything.
But this is just historical coincidence. Being pro fiscal spending and pro gold is a perfectly reasonable position that some at the time held. It just not how politics happened to break down in most of the world.
I actually am on the 4th side where I think (depending on country) leaving gold and doing some amount of austerity or at least re-appropriate spending and taxes is reasonable (remember raising taxes on the rich is austerity as well).
- > 1. Yuan becomes the reserve currency
Who trusts China enough to sign on board with them to do this?
> 2. BTC becomes the reserve currency
Given what we know of history, why would anyone go towards a new (digital) gold standard? It's a bad system:
* https://archive.is/https://www.theatlantic.com/business/arch...
* https://www.goodreads.com/book/show/775143.Golden_Fetters
that limits monetary and fiscal flexibility and helped usher in and prolong the Great Depression.
