Paul Krugman has concentrated his fire recently on those “thumping their chests” over the falling dollar. He has particular scorn for those recommending a return to the gold standard. In Krugman’s view, a simple look at the historical facts will show that it was a superstitious fetish for the yellow metal that prolonged the Great Depression.
A careful, comprehensive response to Krugman’s charges would involve an explanation of the classical gold standard, and the wonderful peace and prosperity it showered on the world. It was only after the major countries abandoned gold during World War I that major imbalances in international trade began to fester — imbalances that eventually exploded during the early 1930s.[1] As a good capitalist pig, I point the reader to my book on the Depression for the full story.
Fortunately, we can take a shortcut in the present article. Using Krugman’s own graph, we can see that the case for abandoning gold — and devaluing currencies in the process — is not nearly as straightforward as he seems to think.
http://mises.org/story/3778
The Gold Standard and the Great Depression
Paul Krugman has concentrated his fire recently on those “thumping their chests” over the falling dollar. He has particular scorn for those recommending a return to the gold standard. In Krugman’s view, a simple look at the historical facts will show that it was a superstitious fetish for the yellow metal that prolonged the Great Depression.
A careful, comprehensive response to Krugman’s charges would involve an explanation of the classical gold standard, and the wonderful peace and prosperity it showered on the world. It was only after the major countries abandoned gold during World War I that major imbalances in international trade began to fester — imbalances that eventually exploded during the early 1930s.[1] As a good capitalist pig, I point the reader to my book on the Depression for the full story.
Fortunately, we can take a shortcut in the present article. Using Krugman’s own graph, we can see that the case for abandoning gold — and devaluing currencies in the process — is not nearly as straightforward as he seems to think.
http://mises.org/story/3778