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Should we return to a gold standard?
A loyal MR reader requests:
...your thoughts on fiat currency vs currencies backed by precious metals. could a return to the gold standard for the US dollar, as advocated by US congressman Ron Paul, bring about a superior economic system?
A gold standard has few advantages over a responsibly run fiat currency, as we have had since about 1980. A real, laissez-faire gold standard involves a pro-cyclical money supply, and who wants that? Why let the money supply shrink during bad times? Some prices and wages are sticky in nominal terms, if only because people feel they are being taken advantage of, not "holding their ground," or losing relative status. Just read Truman Bewley's book. Nominal stickiness is rooted in human nature.
Maybe we could get used to periodic or ongoing deflation, but it would take some doing. In the meantime two percent inflation is not so bad. On the other side of the debate, the resource costs of the gold standard have been overplayed.
The best and indeed only argument for gold is the view that we must, sooner or later, return to rampant inflation. That has been the rule for fiat money throughout most of human history. I think today seigniorage is not an important source of government revenue and financial markets punish politicians for inflation pretty quickly. So I am willing to wait for the "later" to come before making any switches away from fiat money. Keep in mind, people can already denominate their contracts in terms of gold, and hardly anyone wishes to do so.
#22 in a series of 50.
Posted by Tyler Cowen on March 14, 2007 at 03:42 AM in Economics | Permalink
Comments
Thank you for the great article. Greetings from Germany.
Posted by: 24h Blog at Mar 14, 2007 4:39:01 AM
A serious discussion of the gold standard should start by distiinguishing the three functions of money. First, as a unit of account, the gold standard seems to be as good today as has always been. We should acknowledge, however, that there are many other good units of accounts. Second, as a means of payments, today we can have a payments system based only on accounting entries (debits and credits made electronically). That is, we don't need a currency for payments (a few years ago there was a discussion about the "end" of currency and its implications for central banking, but of course central banks have been slowing down the change to an accounting system). Third, as a store of value, today we have so many financial assets that we don't need a currency to store value. In the 1980s, Goodhart's law posed that some financial assets were close substitutes of currency and therefore it was impossible to define "money", but more importantly, this close substitution of some financial assets and currency means that the effects of any monetary policy are hard to predict. To sum, today we don't need a gold standard; we need to move as soon as possible to an accounting system of payments and to forget about monetary policy.
Posted by: Edgardo at Mar 14, 2007 4:39:18 AM
Anyone having an opinion on this subject without having read Huerta de Soto's book should be shot.
Posted by: joe at Mar 14, 2007 5:26:37 AM
Fiat currency always fail. There hasn't been a single example of it NOT happening. The dollar is well on its way, having lost over 95% of its value since it abandoned the gold standard.
But I agree with Ron Paul, don't force the gold standard on people, just legalise competition to the dollar.
Posted by: flix at Mar 14, 2007 5:31:46 AM
"In the meantime two percent inflation is not so bad."
I thought grown ups didn't believe in the tooth fairy or in government CPI...
Posted by: joe at Mar 14, 2007 5:36:01 AM
There are key political/public choice arguments for the gold standard, nicely conveyed by the Schumpeter quotations at the start and especially at the very end of the following paper by Richard Timberlake:
http://www.econjournalwatch.org/pdf/TimberlakeIntellectualTyrannyAugust2005.pdf
Posted by: Dan Klein at Mar 14, 2007 8:13:36 AM
I really don't understand the fixation on a gold standard. Why should our money supply be determined by how much of a certain metal we can dig up from the ground? It has little practical value except as jewelry. The gold standard didn't provide any limitation on inflation as European kings would often dilute the percent of gold in coinage. I'm pretty sure our politicians would just as creative in finding ways to dilute the convertibility of the dollar if it was politically expediant. It also didn't really limit the availability of currency even 200 years ago as people just created substitutes such as short term debt instruments such as receivables and as others have noted we have even more potetnial substitutes now.
If you feel more secure in maintaining your wealth holding gold there is no law to stop you from buying gold, which wasn't the case when we were on a gold standard.
Posted by: asiequana at Mar 14, 2007 9:27:11 AM
For someone who's used to thinking about microeconomics and doesn't know all that much about macroeconomics, could you recommend an explanation why a statement like "A real, laissez-faire gold standard involves a pro-cyclical money supply, and who wants that?" isn't somehow based on an iffy assumption like "people will consistently pass up a risk-free arbitrage" or "government can see more clearly into the economic future than private actors?"
A four page webbed explanation somewhere would be marvellous, but I can read a textbook, too. I just have the problem that the texts I've seen tend to assume less skepticism than I possess.:-| I wrote about a year ago about how economists take to the assumption of government control of money like physics undergraduates take to classical mechanics: very little convincing necessary. I'm in the fringe that needs some convincing that freedom of exchange and freedom of contract can't solve a problem between individuals, and doubly so when the problem seems to be soluble between multiple sovereign states (we don't have a world fiat currency authority...). I would benefit from a treatment of the subject more like quantum mechanics: "Yup, kids, you might be skeptical, but see *this* weird experimental result and this one and *this* and this, and grant that weirdness is necessary."
(I know your statement is relatively uncontroversial. However, seeing how uncontroversial it is to argue that security and commodity speculators obviously need to be suppressed, and that strategic protectionism is an important way to keep the economy growing, I'm not prepared to infer from your statement being uncontroversial that it comes with a good refutation to obvious microeconomic questions.)
Posted by: William Newman at Mar 14, 2007 9:41:01 AM
"I really don't understand the fixation on a gold standard"
The only reason why advocates of free market money focus on gold is because historically gold was money, and it became so (for many good reasons)as a result of the free market and voluntary decisions. I don't care if you want to use cigarettes or uranium as money, just DON'T FORCE ME to use government issued irredeemable paper fiat. Repeal legal tender laws.
www.e-gold.com
Posted by: joe at Mar 14, 2007 11:04:26 AM
GOLD IS MONEY that is why central banks and the BIS hold onto theirs like maniacs.
Read a bit about the (private) Bank of Amsterdam and how their 100% gold standard was the basis of Holland's prosperity for 200 years. Read about the Continental, the Greenback, the Reichsmark and see how they compare to the CHF.
If you believe "a responsibly run fiat currency" can be found anywhere in history, please sell me some of those drugs you're taking...
As to the perils of deflation... it is wonderful to see how the keynesian fallacies have become so deeply entrenched even among "marginalists".
Posted by: joe at Mar 14, 2007 11:15:29 AM
"Why let the money supply shrink during bad times?"
Because expanding the money supply simply introduces a new (and often more damaging) cycle of boom and bust. Bad times persist not so much because government does not increase liquidity--after all, recessions are not characterized by there not being enough money to satisfy all desired transactions. They persist because government hinders wage and price adjustments necessary to allow markets to clear.
Posted by: chris at Mar 14, 2007 11:15:57 AM
1. "The gold standard didn't provide any limitation on inflation as European kings would often dilute the percent of gold in coinage."
2. "It also didn't really limit the availability of currency even 200 years ago as people just created substitutes"
1.- yeah, but people noticed, so that only the debased currency suffered, not actual gold.
That is why the mexican silver dollar was so widely used in the US and China.
2.- Again, holders of those substitutes lost wealth, but those who stuck to gold did not lose purchasing power.
Posted by: andy at Mar 14, 2007 11:24:42 AM
I'm not asking this to antagonize anyone, but out of a genuine desire to understand:
In what sense is competition with the dollar illegal?
From what I know, you can already:
1) Denominate contracts in terms of a specific weight of gold.
2) Charge less for your goods if payment is rendered in gold than dollars. ("A bag of apples here costs
$1 million, OR X grams of gold ... which happens to trade right now for $2!")
3) Convert all dollar payments you get directly into gold (less transaction costs).
So, what would you change to make competition with the dollar more legal? (No flames plz.)
Posted by: Person at Mar 14, 2007 11:42:29 AM
Dear Tyler,
I am very curious about the shrinking money supply thing. There are some historical examples of prolonged deflation coupled with economic growth. Could you please explain how the expected decrease in consumer spending would not be made up by an increase in saving and investment? Is there any reason (apart from Milton Friedman’s holy word on the great depression) and any empirical evidence on how such capital accumulation would be bad for the economy?
Also, how do price drops in PC prices and mobile phones prevent sales of these consumer goods?
Posted by: lucas stevens at Mar 14, 2007 11:45:02 AM
Person,
Two reasons:
Watch what happened to the liberty dollar only recently. It was furiously attacked by the authorities.
Legal tender: you are forced BY LAW to accept dollars in payment of debts, even if you specify a different currency.
Although things are a lot better than they were a few years back. That is why gold backed currencies are experiencing such a boom.
Posted by: joe at Mar 14, 2007 11:52:19 AM
I would add another reason: the Govt, which constitutes more than half of the economy if you include all it does, only accepts dollar payments. (and threatens countries that prefer to sell their oil in euros
But that is good, save in gold and pay taxes in depreciating dollars!
Posted by: andy at Mar 14, 2007 11:57:08 AM
The argument that fiat money is bad because governments are untrustworthy, and we should therefore put up with the deficiencies of the gold standard, is self-defeating.
If you don't trust the government to manage the (fiat) money supply responsibly, why do you trust it to stay on the gold standard if that becomes inconvenient?
Posted by: Bernard Yomtov at Mar 14, 2007 11:57:22 AM
"If you don't trust the government to manage the (fiat) money supply responsibly, why do you trust it to stay on the gold standard if that becomes inconvenient?"
I don't. A real gold standard (not a "money is backed by gold but not redeemable"-Bretton woods sham) is the way of getting government OUT of managing the money supply.
Posted by: joe at Mar 14, 2007 12:05:18 PM
It's amazing how all these monetarist and mainstream economists are against central planning and socialism EXCEPT for money.
If even Greenspan DURING his tenure at the FED talked about abolishing it, and trying to emulate a gold standard, etc.. maybe it is something worth looking into.
Posted by: joe at Mar 14, 2007 12:13:12 PM
joe:
Watch what happened to the liberty dollar only recently. It was furiously attacked by the authorities.
From what I understand, it was attacked because it called itself a dollar and was too similar to existing currency,
*not* because they were using non-FRNs to trade with.
Legal tender: you are forced BY LAW to accept dollars in payment of debts, even if you specify a different currency.
That's not true. From Wikipedia: "Legal tender or forced tender is payment that, by law, cannot be refused in settlement of a debt denominated in the same currency." (emphasis added)
http://en.wikipedia.org/wiki/Legal_tender
If that doesn't convince you, think of it this way: certain contracts are made for gold mining, and they must be
specified in terms of actual gold, not dollars.
andy:
would add another reason: the Govt, which constitutes more than half of the economy if you include all it does, only accepts dollar payments. (and threatens countries that prefer to sell their oil in euros
All this does is add value to dollars. It does *not* threaten the legality of operating in gold. People still trade in e.g. Ithaca Hours.
Posted by: Person at Mar 14, 2007 12:35:29 PM
Alan Greenspan, central banking skeptic:
http://rebirthofreason.com/Articles/Machan/Machans_Musings_-_Alan_Greenspans_Open_Secret.shtml
Posted by: joe at Mar 14, 2007 12:42:38 PM
Person,
You are right. It is now (fairly) legal to use gold as currency. Some of us do, and are very satisfied with the results. I expect many more people will do so as dollar inflation becomes more apparent.
However, since the IRS sees gold as an asset, it does try to collect capital gains tax on it. There are also other attacks by government, tax and regulations on gold, as well as flagrant manipulation of the gold market by the FED with its undisclosed loans of bullion. On the legal tender situation, there is more to it than what wikipedia tells.
Despite all this it is worth it.
As more people see this I fully expect the rebirth of a free market gold standard in the long run, unless the US govt. does an FDR and outlaws "hoarding" of gold again...
Posted by: joe at Mar 14, 2007 12:57:32 PM
"The gold standard didn't provide any limitation on inflation as European kings would often dilute the percent of gold in coinage."
Well the Jesuit scholar Juan de Mariana wrote that a king who did this was a thief and a Tyrant, and justified tirannicide on those grounds. After the murder of Henry III (I think) of France, de Mariana´s books were ordered to be burnt in the whole of France.
Just goes to show how much more ignorant economists are nowadays.
Posted by: anon at Mar 14, 2007 1:06:13 PM
Person,
Of course you are correct that you are free to contract for any exchange you and your counterparty agree on. This can be dollars, euros, yen, gold, or potatoes for that matter. No one will stop you. This is commonplace. I once gave a guy an old car in exchange for some landscaping work. We use dollars for convenience, not because other types of exchange are illegal.
Posted by: Bernard Yomtov at Mar 14, 2007 1:21:07 PM
"I once gave a guy an old car in exchange for some landscaping work."
Paid taxes on it? IRS might be interested...
Try doing it with a house.
Posted by: joe at Mar 14, 2007 1:26:59 PM
Today, there are 4.3 billion ounces of gold in the world and the supply is increasing by only 1.8% each year. On the other hand, $5.8 trillion US dollars are floating around the world, and the supply is growing 4 or 5 times faster than gold."
http://www.safehaven.com/article-7139.htm
Posted by: mogambo at Mar 14, 2007 1:38:03 PM
One terrifying aspect of an asset based system is the the government's temptation to intervene and/or confiscate the asset. If the economy goes south, the government can do all sorts of things to fiat money (while assets like gold and other things retain their real value), but if you are on an asset based system, there would be the strong temptation to either take that asset from people and/or prevent anyone else from mining it.
Isaac
Posted by: Isaac Crawford at Mar 14, 2007 2:05:14 PM
@Isaac,
That's why we have a Second Amendment.
Posted by: RP at Mar 14, 2007 2:09:58 PM
"the government's temptation to intervene and/or confiscate the asset."
You mean like the argentinian government did when they confiscated our dollars? We have not forgotten the evil corralito.
We also remember that when it happened one of the groups that scaped unscathed were the transport unions that used commodity-backed vouchers as currency (a sophisticated form of barter). After the crisis they were buying up everything.
Posted by: argentinabob at Mar 14, 2007 2:16:22 PM
It's incredible that a professor of GMU has never heard of Cantillon Effects and Austrian Business Cycle. Otherwise, I can't imagine the statement about "shrinking" money supply.
Posted by: Sécessionniste at Mar 14, 2007 3:26:05 PM
Paid taxes on it? IRS might be interested...
I don't think the IRS would care. The value of the services was obviously less than what I initially paid for the car, many years earlier, so I had no tax liability, any more than I would have had I simply sold the car.
On the other hand, using an appreciated asset is a different story, unless you donate it to charity. If you trade gold, which is an asset by any definition, for something the tax treatment, I think, will depend on when you bought the gold and how much you paid for it. I see nothing unreasonable here, though I suspect you're going to tell me why I'm wrong.
Posted by: Bernard Yomtov at Mar 14, 2007 3:33:19 PM
Here's a question (not rhetorical, I'm genuinely curious):
I create a contract with someone wherein I am to be paid in gold. After I fulfill my end, they refuse to pay me, claiming they don't have the gold due to a market shortage in the town we live in. I take them to court and demand that they pay me the gold, they claim that they don't have it and can't get it. Is it likely that the court will rule that they can just give me the equivalent dollar amount?
Posted by: Toby at Mar 14, 2007 3:53:30 PM
"I don't think the IRS would care."
The joys of living in a country with no sales tax. You are right there. (does not apply to Europe, 'though)
"If you trade gold, which is an asset by any definition, for something the tax treatment, I think, will depend on when you bought the gold and how much you paid for it."
Exactly, so if gold appreciates against the dollar, using it for transactions would make you liable for lots of capital gains taxes. With cash (which is also an asset on any balance sheet)any transaction is exempt. So nothing unreasonable, but it does show one very clear way in which "gold as currency" is clearly legally discriminated against.
So one of the answers to
"So, what would you change to make competition with the dollar more legal?"
is to eliminate capital gains tax and any tax on gold transfers.
And this is precisely one of the measures that Ron Paul advocated recently.
Posted by: joe at Mar 14, 2007 4:03:49 PM
joe and Bernard: You seem to forget that the IRS would be interested in treating the car as income
for the landscaper. Let's not forget, they said they'd tax the dollar value of a trip to space that was going to be given as a prize in a contest.
Toby: What? How is it possible that someone "can't get the gold", but *can* get you the equivalent dollar
amount? If they can get the equivalent dollar amount, they can get the gold.
Posted by: Person at Mar 14, 2007 4:12:45 PM
"It's incredible that a professor of GMU has never heard of Cantillon Effects and Austrian Business Cycle. "
Unfortunately it is not surprising at all. They "are all monetarists now". But don't worry Sécessionniste, it's a (marginal) improvement on the previous keynesian paradigm. Maybe a few more currency collapses will open their eyes. (Only had about 100 of those this century!)
http://en.wikipedia.org/wiki/Hyperinflation
Posted by: joe at Mar 14, 2007 4:13:29 PM
"A gold standard has few advantages over a responsibly run fiat currency, as we have had since about 1980"
Even if those two premises are true (I'm skeptical) that doesn't imply that a fiat currency system is a good thing. There are numerous examples of failed fiat currencies and few if any of long-term stable fiat systems.
Why should we believe those famous last words "This time it's different"? Why is the US fiat currency destined to last when all others have failed? Even if the currency has been "well run" for the last twenty years or so, what grounds are there to believe it will continue to be so in the future?
Fiat currency seems like an unstable explosive. A shock or mishandling of it and boom (or should I say bust). That it hasn't already exploded doesn't mean it won't blow up in the future.
Posted by: AJTozer at Mar 14, 2007 4:32:14 PM
hey! lets give the guy some credit, at least he got this right.
"The best and indeed only argument for gold is the view that we must, sooner or later, return to rampant inflation."
Questions for the class:
Any relationship between wars and inflation?
Any correlation between debt and inflation?
Any effect of inflation on trade deficits?
you can see what I'm driving at.....
Posted by: flix at Mar 14, 2007 4:50:54 PM
Exactly, so if gold appreciates against the dollar, using it for transactions would make you liable for lots of capital gains taxes. With cash (which is also an asset on any balance sheet)any transaction is exempt. So nothing unreasonable, but it does show one very clear way in which "gold as currency" is clearly legally discriminated against.
Huh? Why should gold enjoy this privilege as opposed to, say, real estate or stocks and bonds or any other asset you might give someone in a trade. Cash transactions are exempt because the dollar can't appreciate against the dollar.
You seem to forget that the IRS would be interested in treating the car as income for the landscaper.
Not my worry.
Posted by: Bernard Yomtov at Mar 14, 2007 8:01:53 PM
Gangsters, drug traffickers, corrupt politicians and even Saddam Hussein on the run use (or used in the last example) U.S. dollars because they are light and are the most liquid asset in the world for large or illegal transactions. The free market has spoken.
Posted by: Mark at Mar 14, 2007 10:04:07 PM
"Gangsters, drug traffickers, corrupt politicians and even Saddam Hussein on the run use (or used in the last example) U.S. dollars "
Of course, the biggest gangster, gun running, drug traffickin', corrupt political organisation is the one that actually prints the USD...
BTW, seeing as the DEA confiscates large cash amounts without trial, internet currencies have started to be used by those on the run.
The thing about the free market speaking, is that it can say one thing today, and another tomorrow.
Posted by: andy at Mar 15, 2007 4:51:20 AM
Price stability under the gold standard?! Certainly not in the medium run. The problem with the pre-1929 gold standard that some here seem to like is that the money supply has no way of adjusting to real economic activity, while basically imposing an exogenous price of tradables. The money supply was basically prone to sunspots, that is, self-fulfilling booms and busts. It's no coincidence that we haven't had another Great Depression since going off gold, while we'd had them any number of times before. The early 1840s. The 1870s. The 1890s. Post-WWI. 1929-41. Deposit insurance and a flexible money supply mean a great deal in a monetary economy in terms of stability and an efficient allocation of resources. I can't seriously see someone wanting to return to a boom-bust cycle driven by credit market fluctuations and the Fed's response to these fluctuations.
Viewed from this perspective, the post-1980 Fed is definitely the lesser of two evils. Let's just hope it stays this way, with the monetary base on average growing at 5% and real activity at 3% for an average inflation rate of 2%. Or, depending on the mix of short-term shocks that hit the economy, a responsible feedback from inflation and real activity into policy.
Posted by: Chris at Mar 15, 2007 12:06:26 PM
Comparing the depressions of the 1870s and 1890s or even the 1907 bust to the Great Depression is the best argument that could be made FOR the gold standard. Why do you think they called it Great?
It is like comparing the 1898 war with Spain to WWI.
Actually look at the numbers before you make such assertions. Look at unemployment, look at prices, look at bank closures.
Posted by: histo at Mar 15, 2007 12:55:31 PM
"Price stability under the gold standard?! "
And actually look at prices!
"Between 1875 and 1896, according to Milton Friedman, prices fell in the United States by 1.7% a year, and in Britain by 0.8% a year"
http://en.wikipedia.org/wiki/Deflation_(economics)#Deflation_in_the_United_States
Posted by: histo at Mar 15, 2007 12:59:47 PM
Histo:
Actually looking at the data that I could find, we had an average of over 10% unemployment all throughout the 1890s with an average of about 7% from 1890 through 1932 versus about 5% in the postwar period. And both inflation and unemployment were in fact much more volatile during that period than during the post-WWII period as well. And these recessions came along with banking panics and huge swings in the price level in 1873, 1893, 1907, 1930, 1931, 1932, and 1933 with some other close calls and nasty recessions and inflations (e.g. 1920) in between. All under the gold standard and none since then. All driven by self-fulfilling expectations or outright monetary mismanagement, not fundamental business conditions. The US economy did not become 25% less productive between 1929 and 1932. I'd much rather that the Fed and banking regulators do their job and keep currency crises and banking panics from happening in the first place, thank you very much. This was Friedman and Schwartz's basic point in their Monetary History, and I buy their argument about 75%.
Will I take a fairly stable 2-3% long-run inflation rate as a cost for otherwise much better Fed policy since about 1980? Sure. I'd rather that the Fed pick a target closer to 1% so it could keep nominal rates a little lower. But to me the benefits of being able to prevent self-fulfilling crashes and promote macroeconomic stability are well worth the cost of slightly higher long-run inflation.
Posted by: Chris at Mar 15, 2007 4:26:05 PM
"And these recessions came along with banking panics and huge swings in the price level in 1873, 1893, 1907, 1930, 1931, 1932, and 1933 with some other close calls and nasty recessions and inflations (e.g. 1920) in between."
The US fiat currency came along in 1913 so all but the first few of those events happened after there was already a central bank in place.
I am not an economist and I don't pretend to be able to defend or refute the claim that a "well run" fiat currency is superior or inferior to a commodity currency. I will admit that the idea of a small, secretive, elite cadre of central planners offends my libertarian intuition. But I'm used to that.
The issues I tried to raise above are:
1) Historically, fiat currencies have failed catastrophically.
2) Given human nature, greed, hunger for power and the eternal search for a free lunch, it seems unlikely that a fiat currency will ever last.
The US fiat currency has been around for 90 some years. The (undebated) claim on this thread is that it's only been "well run" for about the last twenty or so years. That does not install confidence. It still seems that a "well run" fiat currency is the exception rather than the norm. Why should I believe this time is different?
Even if a "well run" fiat currency is good (I'm still skeptical) and that the fed has run the currency well for the last twenty years, why would I believe that it will continue to be that way into the future? History and human nature would argue against that position.
Posted by: AJTozer at Mar 15, 2007 8:38:00 PM
"The money supply was basically prone to sunspots, that is, self-fulfilling booms and busts. It's no coincidence that we haven't had another Great Depression since going off gold, while we'd had them any number of times before."
Considering that the Swiss Franc has been gold-backed for the whole of the XX Century (until 1999) and Switzerland has been one of the most consistent nations in economic growth and unemployment, I find it very hard to believe that the gold standard causes depressions or cyclical instability.
Posted by: anon at Mar 16, 2007 5:24:39 AM
http://en.wikipedia.org/wiki/Digital_gold_currency
http://www.strike-the-root.com/interviews/davidson.html
Posted by: joe at Mar 16, 2007 7:14:16 AM
It's yet to be seen how responsible this fiat currency experiment has been going as we have a massive debt bubble fueled by a massive increase in debt since the mid 90s so the jury is still out on this one. We'll see how this is resolved. Also, A fiat currency did not stop Japan from experiencing a persistant decline in credit from occuring in the 90s.
Posted by: Samuel at Mar 18, 2007 5:07:15 AM
Ben Bernanke about the great depression:
"The correct interpretation of the 1920s, then, is not the popular one--that the stock market got overvalued, crashed, and caused a Great Depression. The true story is that monetary policy tried overzealously to stop the rise in stock prices. But the main effect of the tight monetary policy, as Benjamin Strong had predicted, was to slow the economy--both domestically and, through the workings of the gold standard, abroad. The slowing economy, together with rising interest rates, was in turn a major factor in precipitating the stock market crash. This interpretation of the events of the late 1920s is shared by the most knowledgeable students of the period, including Keynes, Friedman and Schwartz, and other leading scholars of both the Depression era and today."
http://www.federalreserve.gov/BoardDocs/Speeches/2002/20021015/default.htm
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