His paper shows that countries who held onto the gold standard longer were more likely to adopt protectionist policies.
It wasn't abandoning the gold standard that allowed for recovery, but the protectionist policies that went with it.
It wasn't abandoning the gold standard that allowed for recovery, but the protectionist policies that went with it.
Realistically, Eichengreen's argument is considered so solid these days that even fringe nutjobs with an anti-FDR or anti-Keynes agenda don't tackle it straight on. Instead, the typical plan is to insinuate that fiscal stimulus doesn't work because the US did not achieve full recovery before WWII.
Of course, anyone who has taken even an undergraduate course in US economic history should know that fiscal contractions on the state-level throughout the mid-1930s basically offset expansionary fiscal policy on the federal level (the seminal paper is E. Cary Brown's "Fiscal Policy in the Thirties" [1956]). This is why no-one in mainstream economics believes fiscal policy was truly expansionary in the US during the 1930s. That said, if you're asking why this is relevant that is a good point, since the important thing about leaving the gold standard is not that it led to immediate INFLATION so much as that it stopped DEFLATION and began the slow process of recovery. And this is the observation made by the piece and it is absolutely correct: once the United States left the gold standard the country's near double-digit annual deflation stopped and its process of recovery - however slow and faltering - began.
Furthermore, it may be that looser monetary policy went hand in hand with war production in leading a recovery. Convertibility was often suspended in previous wars to help finance them.
There's no consensus on this matter.
There is a clear consensus that fiscal stimulus in war spending played a key role in pulling the United States back to full employment. There is also a clear consensus that the gold standard served as a transmission mechanism for deflationary pressures internationally. If you do not believe this, I'd challenge you to find even a single NBER paper that argues otherwise.
Bernanke has been trying to create inflation--credit expansion--since December 2008 and even a trillion dollar unfundable deficit can't do it! Why?
Asset prices aren't cheap.
The fact that unemployment strangles wage increases-inflation--and might be enjoyed by corporates seems lost on everyone in these discussions.
It's taken trillions and billions of guarantees--insurance--, subsidized purchase programs, credits and special financing programs to take the SP500 just back to October 2007 levels. The Nasdaq is still, what, 40% off of the tech top from over a decade ago?
But wait, Apple is minting money--true-- and AMZN is still losing money! The NDX is nothing without those two favored stocks.
Correlation vs. causation, pal. Don't conflate the two!
Cheap assets and labor drive credit expansions and economic fortunes.