World War I made gold an unstable store of value [by concentrating it in the US].Some economists correctly predicted that return to the gold standard after WWI would cause a deflation.
Had the price of gold been raised in the late 1920's,
or had the major central banks pursued policies of price stability instead of adhering to the gold standard,
there would have been no Great Depression, no Nazi revolution and no World War II.
I remembered seeing an article in the WSJ based on this lecture, back in the day. And I thought it was germane to the discussion of the Obama theory that the current housing credit crunch is reminiscent of the Great Depression.
No. The war made European economies in general unstable because of the destruction, the taxation, the debts, etc. Those who wanted to be able to print money at will scapegoated gold, but there was nothing wrong with gold. The fact that the US had a concentration of gold simply meant the the US would be buying a lot of goods from Europe, which would have been a good thing for the European economies.
Some economists correctly predicted that return to the gold standard after WWI would cause a deflation.
In the first place there is nothing wrong with deflation per se. In peacetime it just means the economy is getting more efficient so everyone's savings are increasing in value. This author name drops von Mises and he's right about von Mises' prediction. What he doesn't tell us is that von Mises had nothing against deflation.
In the second place any excessive deflation was caused by the the war, not by gold. Going off the gold standard didn't relieve the effect of the war but it did transfer the worst economic effects of the war from the well connected to the general public.
Had the price of gold been raised in the late 1920's, or had the major central banks pursued policies of price stability instead of adhering to the gold standard, there would have been no Great Depression, no Nazi revolution and no World War II.
Where to begin... The Nazi phenomena was a result of the unfair Versailles treaty. It had nothing to do with the gold standard and the suggestion is just stupid.
The central banks were never on a pure gold standard to begin with. Every country practiced fractional reserve banking and most central banks did follow a policy of price stability (though not Germany of course). The Fed printed money all through the twenties. It was precisely those policies that caused the inefficiencies that led to the depression.
Never forget that the Nobel Memorial Prize in economics is awarded by a central bank.
Also never forget that most economists get their paychecks from a government.
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