Tuesday, August 28, 2012

Celebrate the Fed

This is one of them: Velocity since 1869. (The red is what FRED had before.)

I am still astounded by the density of recessions up to the 1930s.


Jazzbumpa said...

I am still astounded by the density of recessions up to the 1930s.

We were on the gold standard. Deflationary pressures lurk behind every rock and tree.

Now, the gold bugs will no doubt reply that under a gold standard big bubbles couldn’t happen, and therefore there wouldn’t be major financial crises. And it’s true: under the gold standard America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. Oh, wait.


So far, 3 failed tries to post. I can't decipher the god damned characters.


The Arthurian said...

JzB, I tried the link 3 times and got an advertisement that would not go away. Then I dropoped everything after the last slash and it worked fine. PK writes:
"And when are real rates low? High inflation can do that, as it did in the late 1970s; but so can a severe economic slump due to a deleveraging shock, as in recent years."

My first reaction to that was: we would not HAVE high inflation or a severe deleveraging shock under a gold standard. I think that reaction is close to correct.

I think that having a gold standard would put caps on everything -- on how much inflation we get, and on how much debt accumulates before the deleveraging starts.


Joshua Wojnilower said...

JzB, bubbles certainly can happen on a gold standard. I think its important to note that growth was actually strong despite the number of crises/panics. (Though this doesn't mean gold standard was the cause, obviously)

Art, I think you're at least partially correct in the sense that private debt would likely be more constrained. However, since public debt would also be constrained, I could still envision a pretty severe deleveraging (think peripheral Europe).