Hamilton on “Europe in 1931″
James Hamilton has an interesting new post (along with slides and video from a recent conference dealing with these issues) on the gold standard and the Great Depression, and connections to today’s Euro crisis.
In part, he writes:
In 1931, countries faced doubts about whether they would stay on the gold standard, and had a choice of either to abandon gold or else to inflict further domestic economic damage in the form of monetary contraction and price deflation. Those doubts and their damage ended up bouncing across countries like a ping pong ball. In 2012, countries face doubts about whether they will remain in the European monetary union, and have a choice of either to abandon (or be forced out of) the euro or else to inflict further domestic economic damage in the form of more fiscal contraction. We’re watching those fears and their consequences today move from country to country in real time.