Analysis of information sources in references of the Wikipedia article "Gold standard" in English language version.
Countries with current account surpluses accumulated gold, while deficit countries saw their gold stocks diminish. This, in turn, contributed to upward pressure on domestic spending and prices in surplus countries and downward pressure on them in deficit countries, thereby leading to a change ... that should, eventually, have reduced imbalances.
'Deflation hurts borrowers and rewards savers,' said Drew Matus, senior economist at Banc of America Securities-Merrill Lynch in New York, in a telephone interview. 'If you do borrow right now, and we go through a period of deflation, your cost of borrowing just went through the roof.'
{{cite book}}: ISBN / Date incompatibility (help){{cite book}}: ISBN / Date incompatibility (help)The key element in the transmission of the Great Depression, the mechanism that linked the economies of the world together in this downward spiral, was the gold standard. It is generally accepted that adherence to fixed exchange rates was the key element in explaining the timing and the differential severity of the crisis. Monetary and fiscal policies were used to defend the gold standard and not to arrest declining output and rising unemployment.
In the 1930s, the United States was in a situation that satisfied the conditions for a liquidity trap. Over 1929–1933 overnight rates fell to zero, and they remained on the floor through the 1930s.
In September 1931, following a period of financial upheaval in Europe that created concerns about British investments on the Continent, speculators attacked the British pound, presenting pounds to the Bank of England and demanding gold in return. ... Unable to continue supporting the pound at its official value, Great Britain was forced to leave the gold standard, ... With the collapse of the pound, speculators turned their attention to the U.S. dollar
How the Gold Standard Worked:
In theory, international settlement in gold meant that the international monetary system based on the Gold Standard was self-correcting.
... although in practice it was more complex. ... The main tool was the discount rate (...) which would in turn influence market interest rates. A rise in interest rates would speed up the adjustment process through two channels. First, it would make borrowing more expensive, reducing investment spending and domestic demand, which in turn would put downward pressure on domestic prices, ... Second, higher interest rates would attract money from abroad, ... The central bank could also directly affect the amount of money in circulation by buying or selling domestic assets ...
The use of such methods meant that any correction of an economic imbalance would be accelerated and normally it would not be necessary to wait for the point at which substantial quantities of gold needed to be transported from one country to another.
Financial repression occurs when governments implement policies to channel to themselves funds that in a deregulated market environment would go elsewhere
As financial historian Niall Ferguson writes in Newsweek: 'Double-Dip Depression ... We forget that the Great Depression was like a soccer match, there were two halves.' The 1929 crash kicked off the first half. But what 'made the depression truly "great" ... began with the European banking crisis of 1931.' Sound familiar?
The inflationary attempts of the government from January to October were thus offset by the people's attempts to convert their bank deposits into legal tender ... Hence, the will of the public caused bank reserves to decline by $400 million in the latter half of 1931, and the money supply, as a consequence, fell by over four billion dollars in the same period.
Throughout the European crisis, the Federal Reserve, particularly the New York Bank, tried its best to aid the European governments and to prop up unsound credit positions. ... The New York Federal Reserve loaned, in 1931, $125 million to the Bank of England, $25 million to the German Reichsbank, and smaller amounts to Hungary and Austria. As a result, much frozen assets were shifted, to become burdens to the United States.
Another major factor is that governments in the 1930s were interfering with wages and prices more so than at any prior point in (peacetime) history
The key element in the transmission of the Great Depression, the mechanism that linked the economies of the world together in this downward spiral, was the gold standard. It is generally accepted that adherence to fixed exchange rates was the key element in explaining the timing and the differential severity of the crisis. Monetary and fiscal policies were used to defend the gold standard and not to arrest declining output and rising unemployment.
The key element in the transmission of the Great Depression, the mechanism that linked the economies of the world together in this downward spiral, was the gold standard. It is generally accepted that adherence to fixed exchange rates was the key element in explaining the timing and the differential severity of the crisis. Monetary and fiscal policies were used to defend the gold standard and not to arrest declining output and rising unemployment.
In the 1930s, the United States was in a situation that satisfied the conditions for a liquidity trap. Over 1929–1933 overnight rates fell to zero, and they remained on the floor through the 1930s.
Another major factor is that governments in the 1930s were interfering with wages and prices more so than at any prior point in (peacetime) history
Countries with current account surpluses accumulated gold, while deficit countries saw their gold stocks diminish. This, in turn, contributed to upward pressure on domestic spending and prices in surplus countries and downward pressure on them in deficit countries, thereby leading to a change ... that should, eventually, have reduced imbalances.
The key element in the transmission of the Great Depression, the mechanism that linked the economies of the world together in this downward spiral, was the gold standard. It is generally accepted that adherence to fixed exchange rates was the key element in explaining the timing and the differential severity of the crisis. Monetary and fiscal policies were used to defend the gold standard and not to arrest declining output and rising unemployment.