• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 703 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

  1. Home
  2. Markets
  3. Other

Gold and the Great Depression; the Great Myth

As I peruse the usual financial sites that I am also fortunate to be on, I noticed an article that made a reference about gold and the Great Depression. The writer normally covers investing and the financial markets but this time he veered into a topic that I have had a keen interest in since my college days; the Great Depression.

Just know that the causes and issues of the Great Depression are not bygone events; They are very relevant to today's economy and financial markets.

I will try to keep this article short but I read something in his piece that compelled me to address it. He writes:

"...We no longer have a gold standard, which is a GOOD thing.
The gold standard of years past...was largely to blame for the Great Depression."

Now, keep in mind that I normally think that this writer offers good commentaries and I wish him well. Readers will find his views on financial markets very useful. However, I can't let items like this pass by without commentary. Let me state the main point of my essay:

The Gold standard had NOTHING to do with creating the Great Depression.
Absolutely NOTHING!

Blaming the gold standard for the Great Depression would be like blaming a seat belt for a multi-car crash. It defies common sense and logic.

In fact, had the federal government adhered to a gold standard, it would have curtailed the dangerous over-production of fiat currency. Remember that the first event of the Great Depression was the collapse of the stock market in 1929. This event was largely due to the government's reckless creation of easy credit and a currency bubble (sound familiar?). If America's central bank, "the Fed", was constrained by a gold standard, a bubble would not have been created in the first place. A gold standard puts a "straight jacked" on reckless currency inflation.

We must also keep in mind that the Great Depression was not a singular event...it was a series of events induced by federal government blunders that hurt (and suppressed) economic activity for over a full decade.

Massive, stifling regulations (such as Smoot-Hawley) were implemented along with oppressive tax rates (hitting 96% by World War II!) that kept the economy struggling throughout the 1930s. From massive stimulus spending, the government burden grew beyond the economy's ability to carry it (does that also sound familiar?).

In addition, federal wage policies made hiring employees too expensive and this forced unemployment to stay at artificially high levels for years. It can not be emphasized enough; depressions are NOT caused by a private, free market economy. The culprit is government.

Lastly, the next persistent myth was that that World War II got us out of the Great Depression.

Wrong! Wrong! Wrong!

World War II only gave us the ability to give the unemployed a uniform and a gun and ship them overseas.

War doesn't solve economic problems...it creates them. If war actually helped an economy then the answer is simple; produce a million bombs and then dump into in the ocean! Wouldn't that create prosperity?! Of course not!

War is actually the most obvious example of the "broken window fallacy" that the great Henry Hazlitt so ably described in his book, "Economics in One Lesson" (available at Fee.org).

Before we make the same destructive mistakes (which have been happening in recent years anyway, it seems), we need to understand the truth because the causes and symptoms of depressions and recessions. A good place to start would be to go the Mises institute website (Mises.org) and get a copy of Murray Rothbard's excellent book, America's Great Depression.

The bottom line is that if America (our government, actually) adhered to a gold standard, we would be much, much better off than we are now.

The sooner we learn the lessons of history (and the value of gold and a gold standard), the sooner we would be much more prosperous.

Until the government its their act together (never?), we need to take measures to protect our personal prosperity. Accumulating gold and voting for those that want to severely limit the government's role in meddling in our private economy are good for starters.

 

Back to homepage

Leave a comment

Leave a comment