I was at a conference at the Cato Institute two weeks ago
discussing some research by Dartmouth Professor Doug Irwin on
the role of the gold standard in the Great Depression of
1929-1933. If you’re interested, you can see a written version
of my comments, the slides from my presentation, or a video of
the session (my comments begin a little more than half way in).
Here I’d like to relate some of the discussion of what happened
in Europe in 1931, and comment on some of the parallels with
what is going on today. Some people think of the Great
Depression as beginning or even caused by a stock market crash
in October 1929. But Robert Shiller’s data indicate a broad
market decline that month of 26%, not a whole lot worse than the
20% decline we saw in September 2008. From September 1929 to
March 1931, the total stock market decline was 44%, which was
milder than the 49% decline from September 2007 to March 2009.
The Federal Reserve Board’s index of industrial production fell
28% from September 1929 to March 1931,