I had heard bad things about Keynesian economist Paul Krugman not allowing comments on his blog that are too critical, but that turned out not to be an issue. In a recent post he argues that the gold standard is obviously flawed because economic recovery during the Great Depression was highly correlated with going off the gold standard. Nevertheless, my usual criticism of this point got approved for others to see. It's this comment, which I'll repost here:
I’ve known about this correlation for a while, but I think it’s misleading, regardless of the merits of a gold standard.
Think about it this way: at the time, people expected their money to be convertible at a specific rate into gold. “Going off the gold standard” is therefore a roundabout way of saying “robbing people of their wealth”, because it amounts to expropriation of their gold holdings.
So this correlation (between going off the gold standard and recovery) reduces to the observation that “when times are bad, taking rich people’s stuff and redistributing it can making things look a lot better in the short term” … which isn’t so impressive when you look at it that way.
The real question is, *discounting* for the usual effects of looting the rich, did it make the economy better off than it would have been without such capricious, revolution-like activity?
I agree that there's something about expropriation going on here, but I wonder if it's more of an international effect. Like, a small country that had a bunch of foreign holders of its bonds could screw them over and benefit in the short-term, whereas a larger country would only be screwing itself.
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