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How That Nasty Gold Caused the Depression

July 25, 2009

One of the many myths today receiving retrospective support from today’s servants of power is that adherence to the gold standard caused the economy in countries that did so in the 1930s to recover more slowly from the Depression.

Probably the leading proponent of this apology is Barry Eichengreen, author of the very-successful “Golden Fetters.” As this article in the Economist reports, he has now produced a paper showing that, with one enormous exception, countries “clinging” to the gold standard too long adopted protectionist policies more than did countries that did not. Duh…

So, we’re tacitly invited to consider the proposition that countries that enacted protectionist trade policies recovered more-slowly from the Depression than did those that kept their borders more open to trade.

I buy that!

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