wikipedia article on Great depression ( http://en.wikipedia.org/wiki/Great_depression ) says “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…” It referes to " Michael D. Bordo, Gold Standard, in The Concise Encyclopedia of Economics".
Can any one please give the Austrian perspective on this ( with reference to papers or books ).
thanks
I can give the perspective, but I don’t have a good paper on hand. It was a BS gold standard. WWI caused most of the “gold standard” nations to temporarily suspend it, and when they resumed it, they all generally had more claims to gold than they had gold. Rather than adjust their redemption rates, they used half-brained schemes to protect a fraudulent system. The failure of these systems cannot be conflated as the failure of the gold standard. It should be called a failure of central banking.
ok, check this out:
http://mises.org/journals/qjae/pdf/qjae8_3_4.pdf
Go to page 69 and check out “The Effects of the First World War and the Great Depression”. It does not really defend the charge against the gold standard so much as it explains that most economic textbooks do not link government policy during WWI and central banking to the subsequent failure of the gold standard. As he explains, passive voice is used, instead of identifying actors who were devaluing the currency - inflationist central banks and governments.
We should make an effort to correct the mistakes on there.
Is it really a mistake? What is a gold standard? It is a central bank/government issue of notes that are convertible into gold at a fixed price. As such, it failed, because gov’ts and central banks over-issued notes. It should simply be pointed out as a government failure, rather than a market failure.
I think a better approach would be to remark that the Austrian Theory of the Business Cycle holds valid under a gold standard, and that the downturn of the Great Depression fits a giant example of such. From before WWI to the mid-20’s or later, governments issued notes without the need to convert into gold, causing an aritificial boom.
The Wikipedia article on the "Great Depression in the United States" lumps Austrian economists with the Keynesians and monetarists:
“Current theories may be broadly classified into two main points of view. First, there is orthodox classical economics, monetarist, Keynesian, Austrian Economics and neoclassical economic theory, which focuses on the macroeconomic effects of money supply, including Mass production and consumption. Second, there are structural theories, including those of institutional economics, that point to underconsumption and over-investment (economic bubble), or to malfeasance by bankers and industrialists.”