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ROLE OF THE INTERNATIONAL GOLD STANDARD IN PROPAGATING THE GREAT DEPRESSION
Author(s) -
HAMILTON JAMES D.
Publication year - 1988
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1988.tb00286.x
Subject(s) - great depression , economics , gold standard (test) , speculation , volatility (finance) , debt , monetary economics , recession , capital market , international economics , financial economics , macroeconomics , finance , political science , statistics , mathematics , law
I do not claim in this paper that the international gold standard was a principal cause of the Great Depression. Instead, I explore the events that allowed the world to slip deeper into depression despite the gold standard. The volatility of international short‐term capital flows surely contributed greatly to the Depression. I argue that this volatility was exacerbated—rather than ameliorated—by the international gold standard. The reason is that despite governments' legal assurances that they are committed to a gold standard, speculators never perceive the terms of gold parity as immutable. This statement holds with increasing force when one observes the precarious status of government debts and international finance during the 1920s. This reality renders a gold standard vulnerable to precisely the type of volatility in international capital markets that made the 1931 downturn more severe.