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It is a really thick book not a paper. And while it doesn't hypothesize about protectionism as far as I remember, if you really want to argue that the gold stan
by trevelyan 14y ago
It is a really thick book not a paper. And while it doesn't hypothesize about protectionism as far as I remember, if you really want to argue that the gold standard forced countries to embrace destructive trade policies in a statistically-significant way, you are not doing its advocates any favors.
Realistically, Eichengreen's argument is considered so solid these days that even fringe nutjobs with an anti-FDR or anti-Keynes agenda don't tackle it straight on. Instead, the typical plan is to insinuate that fiscal stimulus doesn't work because the US did not achieve full recovery before WWII.
Of course, anyone who has taken even an undergraduate course in US economic history should know that fiscal contractions on the state-level throughout the mid-1930s basically offset expansionary fiscal policy on the federal level (the seminal paper is E. Cary Brown's "Fiscal Policy in the Thirties" [1956]). This is why no-one in mainstream economics believes fiscal policy was truly expansionary in the US during the 1930s. That said, if you're asking why this is relevant that is a good point, since the important thing about leaving the gold standard is not that it led to immediate INFLATION so much as that it stopped DEFLATION and began the slow process of recovery. And this is the observation made by the piece and it is absolutely correct: once the United States left the gold standard the country's near double-digit annual deflation stopped and its process of recovery - however slow and faltering - began.
- leg100 14y agoComing off the gold standard was probably the correct monetary policy at the time. But one cannot correlate the ending of deflation with a 'recovery', especially one that is sustainable and not at the expense of others (i.e. those who left the gold standard later; if a country devalues its currency it would see an 'immediate recovery', but really it's a case of taking from one hand and giving to another). Furthermore, it may be that looser monetary policy went hand in hand with war production in leading a recovery. Convertibility was often suspended in previous wars to help finance them. There's no consensus on this matter.
- trevelyan 14y agoRespectfully, time series analysis involves the use of statistical techniques which have been designed precisely to tease out these kinds of correlations. So what you claim to be impossible is not only statistically possible, but in fact constitutes mainstream econometrics. There is a clear consensus that fiscal stimulus in war spending played a key role in pulling the United States back to full employment. There is also a clear consensus that the gold standard served as a transmission mechanism for deflationary pressures internationally. If you do not believe this, I'd challenge you to find even a single NBER paper that argues otherwise.
- nwzpaperman 14y agoIt's easy to engineer a credit expansion--inflation--in the economy when all of the real estate and stocks have been discounted--lost--80%+ off their pre-depression price levels. Bernanke has been trying to create inflation--credit expansion--since December 2008 and even a trillion dollar unfundable deficit can't do it! Why? Asset prices aren't cheap. The fact that unemployment strangles wage increases-inflation--and might be enjoyed by corporates seems lost on everyone in these discussions. It's taken trillions and billions of guarantees--insurance--, subsidized purchase programs, credits and special financing programs to take the SP500 just back to October 2007 levels. The Nasdaq is still, what, 40% off of the tech top from over a decade ago? But wait, Apple is minting money--true-- and AMZN is still losing money! The NDX is nothing without those two favored stocks. Correlation vs. causation, pal. Don't conflate the two! Cheap assets and labor drive credit expansions and economic fortunes.