Bernanke ben s. (2004). essays on the great depression. princeton university press
Opponents made several objections to the Friedman and Schwartz thesis that are worth highlighting here.
The great depression essay intro
Bernanke is a member of the Board of Governors of the U. Bernanke certainly knows the importance of well-functioning markets. Ironically, reduced political and ideological support for the gold standard made it more difficult for central banks to maintain the gold values of their currencies, as speculators understood that the underlying commitment to adhere to the gold standard at all costs had been weakened significantly. The economy improved after Franklin D. Cambridge, Mass. A second question is whether the large decline in the money supply seen during the s was primarily a cause or an effect of falling output and prices. Thus, speculative attacks became much more likely to succeed and hence more likely to occur. The gold standard was suspended during World War I, however, because of disruptions to trade and international capital flows and because countries needed more financial flexibility to finance their war efforts. Economic History Flap copy "This influential body of work is a significant contribution to our understanding the depth and persistence of the Great Depression The Depression-era problems he studied are mirrored by similar issues today, and they need urgent attention. Thus monetary policy was not in fact easy at all, despite the very low level of nominal interest rates. The market crash of October showed, if anyone doubted it, that a concerted effort by the Fed can bring down stock prices.
Before the war, the ideology of the gold standard was dominant, to the point that financial investors had no doubt that central banks would find a way to maintain the gold values of their currencies no matter what the circumstances.
During the s, thousands of U. The nine essays form a remarkably coherent whole. By the latter part of the year, the economy had relapsed dramatically.
Surviving banks, rather than expanding their deposits and loans to replace those of the banks lost to panics, retrenched sharply. However, in the absence of that leadership, the worldwide monetary contraction proceeded apace. These underlying problems created stresses for the gold standard that had not existed to the same degree before the war.
One line from his Essays on the Great Depression sounds especially prescient today: 'To the extent that bank panics interfere with normal flows of credit, they may affect the performance of the real economy.
Great depression essay topics
The setting of each currency's value in terms of gold defines a system of fixed exchange rates, in which the relative value of say the U. A second question is whether the large decline in the money supply seen during the s was primarily a cause or an effect of falling output and prices. Meltzer, Allan Available at www. The fact that these contractions in money supplies were invariably followed by declines in output and prices suggests that money was more a cause than an effect of the economic collapse in those countries. The Fed's failure to fulfill its mission was, again, largely the result of the economic theories held by the Federal Reserve leadership. In this scenario, critics pointed out, the Fed would be justified in allowing the money supply to fall, because it would only be accommodating a decline in the amount of money that people want to hold.
With the gold standard constraint removed and the banking system stabilized, the money supply and the price level began to rise.
Friedman and Schwartz discuss other episodes and policy actions as well, such as the Federal Reserve's misguided tightening of policy in which contributed to a new recession in those years.
Remarks by Governor Ben S.
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