Still Fettered After All These Years

The last decade has seen an outpouring of scholarship on the economics of the Great Depression. If there is anything approaching a consensus, it is a synthetic view which admits a role both for monetary policy mistakes and for the international monetary and financial system in transmitting those destabilizing impulses to the rest of the world. It explains the speed and extent of the subsequent decline in terms of both banking crises and the collapse of the gold standard, which conspired in placing deflationary pressure to different degrees on different countries. And, it explains the eventual recovery in terms of the abandonment of the gold standard, which facilitated the pursuit of stabilizing monetary policies, but also in terms of the restoration of stability to banking and financial systems, something that occurred at different times in different countries. One way of understanding the veneer of disputation on this consensus is that different elements dominated in different countries. For the United States, there is no denying the role of monetary policy mistakes in the onset of the Depression, whereas for other countries international monetary instability played the most important part.