Customer Reviews

Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 (Nber Series on Long-Term Factors in Economic Development)

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Barry Eichengreen's classic tale of financial hubris and mismanagement is almost ten years old. But it's still riveting. It's a broad-sweep introduction for generalists and financial buffs alike. And it's very well written too.

The book begins by describing the inner workings of the gold standard and how it evolved from its inception in the 1800s. This part may be a bit dry for generalists, but once underway all the terms become quite easy to understand. It's worth persevering since WW1changed the way the world worked. In particular, the after effects of the war made staying on gold much more difficult for countries experiencing persistent balance of payments deficits.

After that, Eichengreen goes on a tour of the interwar years and aims to show why the collapse of the gold standard and the plunge into depression had nothing to do with the US stock market and everything to do with rivalries and mismanagment on an international scale. The US crash was a symptom of an international crisis, not the cause.

All the classic powderkegs are there. The UK's mindless attempt to rejoin the gold standard at the overvalued, pre-war rate. Vindictive French domestic politics and the hyperinflations in continental Europe. Vindictive French attempts to humiliate the Germans over reparations. Bank runs in Germany and Austria. French and American attempts to bend the rules of the Gold Standard for their own national interests. Wild swings in capital flows from Europe to the US and back again. And the cataclysmic days of 1931 when the whole system collapsed under the weight of banking crises and currency contagion - in ways very similar to Asia in 1997.

After the crash, we get down to the Great Depression and who fared the best. This part is much shorter since it isn't as complicated. Basically, those countries that devalued quickly and went the free market route fared much better than those that didn't. Sweden was a star performer. The US can be found towards the back of the class. Dear old Blighty gets full marks for going solo, although more recent evidence shows this had more to do with throwing in the towel than playing with new ideas.

Strangely there's little mention of Japan. Nippon took a beating in the late 1920s while the yen remained fixed to gold. Once sterling devalued, the Japanese followed suit. The recovery was swift and full blooded. But the central bank forgot to stop the printing press once growth returned and ended up fighting hyperinflation in the late 1930s. So Eichengreen's line that giving up was the great panacea isn't quite as true as he'd have you believe.

All told, Golden Fetters is great. While it lacks facts and figures on banking problems and doesn't really provide convincing evidence on contagion, it works really well as a diary of contrasting fortunes in Europe and the US after the guns fell silent in 1918. If you like history then this is for you.

Eichengreen does it again. His easy-reading prose takes the reader through the monetary meanders of the post-WWI scenario, alternating historical narrative with clear, in-depth looks into economic theory and economic thought. The book features a comprehensive analysis of the intricacies of the interwar gold standard. The international conferences, the German hyperinflation, the roller-coaster of the Franc between 1924 and 1926 and the monetary determinants of the Great Depression are studied with extreme accuracy. This magnificient account will not disappoint either the academic reader or the learned non-specialist.

This is a landmark economics study on the effects of the disastrous gold standard in partly causing the Great Depression, along with the Federal Reserve contracting the money supply, related to the flawed gold standard. This book is intented for advanced economists and is probably not legible for most college-educated people.

Two other essential books on the subject are Essays on the Great Depression by Ben Bernanke, Chairman of the Federal Reserve and America's top economist, and Lessons from the Great Depression (Lionel Robbins Lectures) by Peter Temin, one of the greatest economists of the Great Depression. Those books were also written for economists, although Bernanke's book can be read by average people if you skip around.

The average reader wanting to read about the gold standard in a way that a general reader can understand should read the Pulitzer Prize-winning Freedom from Fear: The American People in Depression and War, 1929-1945 (Oxford History of the United States) by David Kennedy. Kennedy's writes thoroughly about the economics of the Great Depression, yet the Oxford History of the United States is designed for everyone to read.

A very interesting book, especially in the current climate. The debate about maintaining a gold standard (or the euro) really highlights the difficulties that several EU countries will face if they stay in the euro. This book also highlights the tremendous pressure on all central bankers to strategically devalue their currency. Of course the great danger here is that this beggar-thy-neighbor policy will lead to trade tariffs and other tensions.

The book is a bit dense, but well worth the slug.

This book tries to prove the Gold Standard does not work. It should have considered the possibility from a monetarist point of view that the Gold Standard did not work because central bankers, rather than tens of thousands of gold-trading merchants, were controlling the flow of gold. As such, central bankers are prone to collusion and game theory takes over, rather than economic self-interest, which is the real reason IMO why the gold standard failed in the 1930s.

But it is a useful book to highlight the blow-by-blow account of the failure of the gold standard (i.e., fixed money supply) in the 1930s Great Depression (which itself was caused by central bankers), if you read between the lines.

This book would probably make a good textbook for a college course on international financial affairs, but for someone like myself who just wanted to know what the gold standard was, this book is like pulling teeth. Mr. Eichengreen's "Golden Fetters" just goes into too much detail. By page nine of the introduction I wished I hadn't bought the book, by page 30 I was ready to donate it to the local library. If you live and breathe the stock market or international finance, this book may be for you. I'll just wait for a good documentary on the subject on television.