The gold standard and the Great Depression
Countries on gold could not expand their money supply in response to the 1929 crash without triggering outflows. The ones that left gold first — Britain in 1931, the US in 1933 — began recovering first. The ones that stayed on longest suffered the longest.
Ben Bernanke's academic work, before he became Fed chair, was largely about precisely this mechanism. It's the reason the US Fed reacts to modern crises with immediate monetary expansion — a lesson learned the hard way in 1932.
04 · Gold Standard
In the late 19th century most major economies agreed to peg their currencies to gold at a fixed rate. Currencies became effectively interchangeable. The arrangement imposed discipline — you couldn't print more money than you held gold — but it also made economies brittle: a gold outflow forced an immediate contraction in money supply, regardless of real-world conditions.
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