It was the gold standard which caused the recession to become a depression, as countries couldn't expand credit fast enough to fill the gap left by private sector deleveraging. As soon as US went off the gold standard, dollar depreciated against gold and other commodities (Jim Rogers is right when he says commodities went up in the 1930's, but that was after a huge plunge happened in early 1930's. And it was linked to dollar devaluation). As soon as prices started going up, industrial production went back up - including in mining. And that led to new discoveries of gold itself.
Michael Milken has written a very good article in Tuesday's WSJ on the importance of capital structure. This is a very good line: "History isn't a sine wave of endlessly repeated patterns. It's more like a helix that brings similar events around in a different orbit"
1 comment:
It was not the gold standard but government interference that made the great depression great.
The depression of 1920-21 was over quickly (under the gold standard) because the free market was allowed to work. If you want to read about "this time", I'd recommend The Politically Incorrect Guide to the Great Depression and the New Deal
Post a Comment