How the Gold Standard Contributed to the Great Depression

Discussion in 'Economy' started by Toro, Apr 20, 2009.

  1. Toro
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    Toro Diamond Member

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    washingtonpost.com

    Also, in 1931, during the teeth of the Depression, the Fed raised rates from 1.5% to 3.5% to stem the outflow of gold from the country to Britain went Britain went off the gold standard to allow the pound to fluctuate. Raising interest rates during a depression is insane but was a required action under the gold standard so America would not see its gold holdings drain.
     
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  2. Ravi
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    Ravi Diamond Member

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    Is killing Libertarians your avocation or just a hobby?
     
  3. Kevin_Kennedy
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    Kevin_Kennedy Defend Liberty

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    We didn't have a real gold standard in place at the time that could have caused the Great Depression. Once again, we need only look at the Federal Reserve for the cause of the Great Depression, and Hoover and Roosevelt's interventionist policies for exacerbating the situation.

    The Semantic Subversion of the Gold Standard and Free Banking - Kevin D. Rollins - Mises Institute
     
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  4. Kevin_Kennedy
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    Kevin_Kennedy Defend Liberty

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    He hardly "killed" us Libertarians by posting an article that states that the gold standard, which was hardly a gold standard, was responsible for the Great Depression.
     
  5. Iriemon
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    How exactly does this happen? When you need to expand the money supply you just dig up more gold? Gold is a limited resource! That is the problem with it. If you are in a recession and banks and people want gold to hoard, you can't just dig more up.

    That is why the Fed contributed to the great depression. Because the nation was on a freaking gold standard and everyone wanted gold, the Fed had to increase interest rates at the very worst possible time.

    We saw how well that worked in the GD with 50% deflation or whatever it was.

    This is nonsense, it assumes that the supply of gold will somehow magically be exactly matching what the growing economy needs.

    LOL, no it didn't because it was trying to maintain the freaking gold standards.

    Well shoot, maybe if the our money supply just had not involved neutralization or offsetting of international influences on domestic money supplies, incomes, and prices, everything would be peachy.

     
    Last edited: Apr 20, 2009
  6. Iriemon
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    You mean because it involved neutralization or offsetting of international influences on domestic money supplies, incomes, and prices?
     
  7. Kevin_Kennedy
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    You don't need to expand the money supply. Banks can't hoard gold under a gold standard because all the paper currency must be redeemable in gold on demand, hoarding gold under a true gold standard would be fraud.

    A growing economy does not need an increase in the supply of gold, once again.

    Again, it was a false gold standard.
     
  8. xsited1
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    xsited1 Agent P

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    Isn't it great that Americans work all week to earn paper money that the US Government, through central banks, can simply create with no work at all? That's super!
     
  9. Iriemon
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    Well, good to know if all my Bernie Madoff gold certificates are worthless at least he'll be liable for fraud.

    But tell me what happens to the cost borrowing money when, during the next big recession, everyone starts wanting to redeem their gold certificates for gold?

    Right. Interest rates shoot up. Right in the middle of the recession. And making money tough to get is great for an economy in a recession, as we are seeing again to day.

    Well it does unless you like deflation.

    But when you really need to increae the money supply is in a recession.

    Of course. And we know that because of the "neutralization or offsetting of international influences on domestic money supplies, incomes, and prices".

    That's why the Fed had to raise interest rates to maintain it.
     
  10. Iriemon
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    It is super. Finally someone gets it.

    It allows the Fed the flexibility to lower interest rates and the cost of money at times like the current recession, when raising interest rates to maintain a gold standard would be just as disasterous as it was in the early '30s.
     

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