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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (140363)	7/6/2010 2:47:27 PM
From: Katelew	Respond to of 541559

Here's an article on the Depression that's well worth careful reading.....and then reading again. It explains, though not as clearly as it could, the impact the gold standard had on things. As country after country came off it, this had individual impacts on that country's currency value and aggregate money supply. In some countries, the govt. even arbitrarily reset wage levels, I read elsewhere, to bring them in line with the new money supply levels. The amount of micromanagement by all the governments of the EU and the USA was substantial. It's not hard to see why there were probably lots of unintended consequences that may have exacerbated and lengthened the Great Depression. econlib.org And then this section of Wiki is very interesting re the gold standard events. Gold reserve requirements that were law back then prevented the Fed Reserve from expanding the money supply to compensate for the runs on banks. Gold standard Economic studies have indicated that just as the downturn was spread worldwide by the rigidities of the Gold Standard, it was suspending gold convertibility (or devaluing the currency in gold terms) that did most to make recovery possible.[41][42] What policies countries followed after casting off the gold standard, and what results followed varied widely. Every major currency left the gold standard during the Great Depression. Great Britain was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets. The Depression in international perspective.[43]Great Britain, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–1936. According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies.[44]