Few periods in history compare to the Great Depression. Stock market crashes, bread lines, bank runs, and wild currency speculation were worldwide phenomena--all occurring with war looming in the background. This period has provided economists with a marvelous laboratory for studying the links between economic policies and institutions and economic performance. Here, Ben Bernanke has gathered together his essays on why the Great Depression was so devastating.
Considering the similarities between these two periods, it seemed like the right person was in charge of America’s monetary policy and regulating its banking system in 2008. After all, Ben Bernanke, the former head of the Princeton economics department, was the author of the 2000 book, “Essays on the Great Depression.”
Essays on the Great Depression [Ben S
A factor affecting both monetary policy and international trade was the gold standard. At the time of the Wall Street Crash it was regarded with almost religious reverence by the almost all important financial thinkers. The one major exception was British economist John Maynard Keynes. The major central bankes all supported the gold standard: Hjalmar Schacht (German Reich Bank), Montagu Norman (Bank of England), Benjamin Strong (American Federal Reserve), and Emile Moreau (Banque de France). One author argues that the commitment of the major financial institutions to the Gold Standard was especially disatrous in turning a recession into the Great Depression. [Ahamed] The gold standard not only acted to restrict intentional trade, but was a major factor in the vicious deflation which adversely affected domestic economomies. One by one the spiraling interntional crisis forced the major world powers off the Gold Standdard, eventually even Britain. America was the last to go. President Hoover was committed to the Gold Standard and admently refused to take America off of it. Govenor Roosevelt in the 1932 campaign had pledged to maintain the Gold Standard. The President in his First Hundred Days took the prelininary steps to take America off the Gold Standard (1933). One adviser, Lewsis Douglas was shocked, exclaiming, "It is the end of Western civilization." By the time the new president moved to take America off the gold standard, the damage had been done. The international financial system was in disaray and more omniously, the financial crisis had brought Adolf Hitler to power as the new Germsan Chancellor.