Coolidge Prosperity Gave America the Reserve to Weather the Great Depression
The world’s preoccupation with the millennium, Google’s emergence, 9/11, the Fukushima Daiichi nuclear fiasco, and Europe’s current economic crisis, has eclipsed one the world’s greatest unsolved mysteries. What caused the Great Depression? This question remains particularly relevant just five years after another epic-scale financial crisis nearly took down the world financial system. But there is now an important new consensus emerging. The proof is cloaked in statistical algorithms, formulae, and economic-speak, which makes translation difficult, but let’s go back to the Jazz-Age Roaring Twenties to reexamine the evidence.
Calvin Coolidge assumed the presidency of the United States on August 2, 1923 following the death of Warren G. Harding. Coolidge, together with Treasury Secretary Andrew W. Mellon, endeavored to fulfill Harding’s 1920 campaign promises to return the nation to “normalcy” following World War I.[i] Together they engineered an era of unparalleled growth and prosperity for America.[ii] By harnessing America’s financial resources, Coolidge and Mellon were successful in making private funding available for such emerging industries as automobile production, electricity generation, radio broadcasting, consumer products, aviation, and real estate construction. [iii] Gross National Product from 1923 to 1928 grew roughly three percent annually.[iv] The Coolidge administration’s success helped to shrink the national war debt by 34 percent, enhance government efficiency, and cut the tax burden on American citizens. [v] It was a moral imperative.[vi] By March 3, 1929, when Coolidge stepped down as president, tax rates had been slashed to less than one-third those of wartime levels.[vii] By 1927, 98 percent of the population paid no income tax.[viii] People had jobs and the unemployment rate was 3.3 percent. For the first time ordinary people could afford luxuries such as automobiles, radios, refrigerators and vacuum cleaners. [ix]
Within a year after Coolidge’s leaving office the United States found itself in an economic slump. The stock markets crashed on Black Thursday, October 23, 1929 and fell 20 percent. Big banks bought stocks in an attempt to calm the market so that it ended the day down only six percent. The second “hurricane of liquidation” roared on Black Monday, October 28, and the Dow was down roughly 14 percent.[x] On Tuesday, October 29, the Dow fell another 13 percent. Despite the October crash, the Dow for the calendar year recovered and ended down roughly 11.9 percent.[xi] After that initial shock, industrial production fell 37 percent from its peak in 1929 to December 1930. The Depression had arrived.
“If the Great Depression was severe by late 1930, over the next two years it became horrific.”[xii] The Great Depression was an economic period the likes of which the world had never known. At their worst levels U.S. stocks plummeted 90 percent from their peak, industrial production declined 47 percent, real GDP fell 30 percent, deflation was 33 percent, and unemployment exceeded 24 percent—excluding the agriculture sector, unemployment may have exceeded 38 percent. The economy did not return to its previous levels until 1937 and to its pre-Depression growth path until 1942 during the midst of World War II.[xiii] The depressionary period was not a single unicausal phenomenon, but must be regarded as a complex series of related and intertwined causes and effects.[xiv] People were devastated. Both urban and rural areas were decimated. It was the perfect storm.
The search for answers for the Great Depression was urgent. The world’s most distinguished scholars were baffled and rolled up their sleeves to unravel the causes and effects of the immediate crisis and construct proactive responses to prevent such financial calamities in the future. The Depression is a topic that has generated a vast body of literature, active debate, and a variety of conclusions that have converged to a new consensus over the past two decades. The purpose of this paper is to revisit the Depression years in the wake of new causal revelations and to reexamine the Calvin Coolidge presidency in the late 1920s. For those readers wondering if Calvin Coolidge were in any way implicated in the tragedy, rest assured, he was not.
In 1963, Milton Friedman and Anna J. Schwartz published a legendary treatise, A Monetary History of the United States, 1867–1960, a statistical study of the monetary factors in the business cycle, which provided new data and perspective to previous research. Milton Friedman won the Nobel Prize for his pioneering work in economics. The Friedman and Schwartz analyses suggested that the economic collapse of 1929–1933 was the product of the nation’s monetary mechanism gone wrong. Money was not a passive player in the events of the 1930s, “the contraction is in fact a tragic testimonial to the importance of monetary forces.”[xv] They speculated that serious errors were made by the U.S. Federal Reserve System in executing monetary policy prior to and during the Great Depression. Those policy mistakes were central to its onset, severity, and duration.
Friedman and Schwartz conjectured that the death in October 1928 of Benjamin Strong, governor of the New York Federal Reserve Bank and perhaps the most respected banker in the United States, set off a power struggle for control of U.S. monetary policy as Coolidge was preparing to leave office. This led to decisions by the Federal Reserve that catapulted America into the Great Depression.[xvi]
In the spring of 1928 until the crash in October 1929, the Federal Reserve tightened credit to deter speculation on Wall Street. By July 1928, the discount rate had been raised in New York to 5 percent, the highest since 1921, and the System’s sharply reduced holdings of government securities tightened monetary policy [xvii] and choked off the economy. According to Friedman, “The major contraction from 1929 to 1933 was caused primarily by the failure of the Federal Reserve System to follow the course of action for which it was set up. But instead of preventing it, they facilitated it.”[xviii]
More recently, research has progressed beyond the narrow monetarist answer proposed by Professor Friedman. Disciplined econometric models and analyses, conceived by such contemporary economic scholars as Ben S. Bernanke, of Princeton and current Chairman of the U.S. Federal Reserve, Barry Eichengreen, University of California, Christina D. Romer, University of California, Peter Temin, MIT, James D. Hamilton, University of Virginia, and others, reference the publications of scores of economists. These contributions take the understanding of the Great Depression to a new level.
The challenge begins. Over the ensuing half-century supporters of the Friedman-Schwartz theory, known as “monetarists”, clash with other distinguished economists who are unable to accept the certainty of the monetarists’ conclusions. Notably, in 1976, Peter Temin cautions that there is insufficient data from which to draw firm conclusions and asserts that political and non-monetary factors were involved as well.[xix] The controversy stimulates further extensive econometric modeling until, in 1992, Barry Eichengreen develops a compelling theory that the world’s method for balancing international finances had been inextricably changed by World War I.
Gold, the only acceptable currency between nations in the olden days, evolved into a “gold standard” which pegged the values of various currencies to gold. To make the system work Britain stepped up to become the international lender of last resort which, with the credibility and cooperation of the world’s central bankers, supported world trade for a quarter of a century prior to World War I.
Prior to World War I, almost all nations, but most importantly Britain, France and Germany, defended their currencies by linking them to gold. World War I changed that as the fragile strands of confidence broke down. The gold standard, which was essentially suspended during the war, was being laboriously reconstructed. The advent of evolving world social pressures introduced tension and politics into the historic protocol. Central bankers lost their independence in balancing the payment settlements between their nations, which in turn eroded credibility and international cooperation as growing world trade increased the need for greater liquidity.
World War I devastated the physical and monetary infrastructure of Europe. Currency valuations in Europe were fragile, chaotic, and psychologically driven. The war put the United States in a different weight class—the 800 pound gorilla. “The U.S. balance of payments position was greatly strengthened relative to the war-torn nations of Europe. In the mid- 1920s, the financial accounts of other countries were tremendously ‘balanced’ by favorable long-term capital outflows from the U.S.” In attempting to achieve a myriad of conflicting goals the major nations cobbled together an elaborate house of cards. “If U.S. lending was interrupted, the underlying weakness of other countries suddenly would be revealed. As countries lost gold and foreign exchange reserves, the convertibility of their currencies into gold would be threatened. Their central banks would be forced to restrict domestic credit, their fiscal authorities to compress public spending, even if it threatened to plunge their economies into recession.”[xx]
In 1992, Eichengreen explains, “This is what happened when U.S. lending was curtailed in the summer of 1928 as a result of stringent Federal Reserve monetary policy. Inauspiciously, the monetary contraction in the United States coincided with a massive flow of gold to France, where monetary policy was tight for independent reasons. Thus, gold and financial capital were drained by the United States and France from other parts of the world. Superimposed on already weak foreign balances of payments, these events provoked a greatly magnified monetary contraction abroad. In addition these events caused a tightening of fiscal policies in parts of Europe and much of Latin America. This shift in policy worldwide, and not merely the relatively modest shift in the United States, provided the contractionary impasse that set the stage for the 1929 downturn. The minor shift in American policy had such dramatic effects because of the foreign reaction it provoked through its intersection with existing imbalances in the pattern of international settlements and with the gold standard restraints.”[xxi] It was the straw that broke the camel’s back.
The downturn that began in the United States in the late summer or early autumn of 1929 was already evident elsewhere and had been for as long as 12 months. The nations of Europe and Latin America were perilously threatened by a convertibility crisis. So long as governments remained unwilling to devalue they were forced to draw back. Reflation under the gold standard was impossible without the cooperation of the other countries.[xxii] As nations either “sterilized” gold (accumulated “non-monetized” gold in excess of requirements) or left the gold standard, the “money multiplier” worked in reverse to constrict the world’s money supply, which exacerbated the destabilization.[xxiii]
It has been a tortuous road to reach consensus about the cause of the Depression amid the paucity of consistent hard data worldwide, the complexity of conflicting theories, and the emerging science of macroeconomics. This new body of research on the Depression focusing on the operation of the international gold standard (Choudhri and Kochin, 1980; Eichengreen, 1984; Eichengreen and Sachs, 1985; Hamilton, 1988; Temin, 1989; Bernanke and James, 1991; Eichengreen, 1992) provides new evidence that both reinforces and expands upon the monetarists’ beliefs.[xxiv] There are still refinements to be made and lessons to be learned, but perhaps the most important link to the solution is most credibly expressed by Ben S. Bernanke in 2000: “The new gold standard research allows the assertion … that monetary factors played an important causal role, both in the worldwide decline in prices and output and their eventual recovery.” [xxv] He identifies the most significant recent development as a change in the focus of Depression research from a traditional emphasis on events in the United States to a more comparative approach that examines the experiences of many countries simultaneously. He further states that, “To an overwhelming degree, the evidence shows that countries that left the gold standard recovered from the Depression more quickly than countries that remained on gold.”[xxvi] No account of the Great Depression would be complete without an explanation of the worldwide nature of the event and of the channels through which deflationary forces spread among countries. The comparative perspective substantially improves the ability to identify the forces responsible for the world depression.[xxvii]
There is strong evidence suggesting that the Coolidge presidency “was a period of high prosperity and stable economic growth. An enormous construction boom rebuilt American cities. The automobile reshaped American life. The bull market in stocks mirrored soaring American optimism about the future.”[xxviii] By the end of Coolidge’s presidency the real market fundamentals were strong. Productivity and employment were high. Real income rose 3.4 percent per year from 1923–1929.[xxix] Unemployment was 3.3 percent (with a low of 1.8 percent in 1926). Factory payrolls were up. Production between 1920 and 1929 grew 3.1 percent annually. Total factor productivity grew 3.7 percent. Corporate profits and dividends were at record high levels. The gross national product increased in real terms from 296.22 in 1928 to 315.69 in 1929. [xxx] The year 1929 was the best year ever for the U.S. economy.[xxxi] This was outstanding economic performance—performance that justified stock market optimism.[xxxii] The nation was at peace and had confidence in its government. It was a vital period. Almost all Americans were enjoying the prosperity of the day. The future looked bright and exciting. Coolidge embodied the nation’s confidence in the future. He was a president who delivered on his promises. His practical and straightforward decisions were trusted and represented stability.
The Coolidge administration experienced two recessions, in 1924 and 1927, and the Federal Reserve System deftly mitigated them. Friedman and Schwartz commend the Federal Reserve during the Coolidge years for its astute decisions which shaped emerging open market operations and introduced modern economic policy-making. “[The recessions] both were so mild that many if not most of those who lived and worked at the time were unaware that they had happened. … The close synchronism produced much confidence within and without the system that the new monetary machinery offered a delicate yet effective means of smoothing economic fluctuations, and that its operators knew how to use it toward that end. That confidence was accompanied and in turn strengthened by refinement of the monetary tools available [and] greater understanding of their operation.”[xxxiii] They later explain, “An active, vigorous, self-confident policy in the 1920s was followed by a passive, defensive, hesitant policy from 1929–1933.”[xxxiv]
The Coolidge administration returned the U.S. economy to normalcy following World War I. The reduced national debt together with a stable and growing economy gave America the financial wherewithal to weather a collapse. As a safe haven, the U.S. had accumulated three-eighths of the world’s gold supply but had no prudent method of recycling its reserves. The major powers had not yet realized that the size, complexity, and interdependence of its economies had diminished the gold standard’s power to stabilize the monetary regime and, in fact, had destabilized it.
What Went Wrong?
Documenting the timing and severity of the Great Depression in the United States and abroad is more straightforward than explaining what caused the collapse.
Christina D. Romer suggests that the U.S. economy was “clearly cooling off”[xxxv] in the summer of 1929 and that the major factor influencing monetary policy during 1928 and 1929 was most decidedly the escalating stock market. James D. Hamilton cites, “it would have been difficult to design a more contractionary policy than that adopted [by the Federal Reserve] in January 1928.”[xxxvi] After the Great Crash in October 1929 the economy continued to fail. Between October and December 1929 industrial production declined nearly 10 percent. [xxxvii] The recession became suddenly worse and the economy steadily eroded with industrial production falling 37 percent from its peak in 1929 to December 1930.[xxxviii]
U.S. industrial production tumbled 43 percent further from April 1931 until July 1932. By 1932, the unemployment rate stood at over 24 percent. The producer price index declined by slightly over 40 percent between July 1929 and July 1932. [xxxix] As part of the decline, Friedman-Schwartz document four waves of banking panics in the United States. The impact of these banking failures took many forms as depositors became nervous about the safety of banks and feared deflation. “There is little doubt that the Federal Reserve could have done something to stop the first wave of panics in late 1930—but they failed to act. If they had done so, they might have prevented the later panics that so decimated the U.S. financial system.”[xl]
“The timing and severity of the Great Depression varied substantially across countries.” Great Britain struggled with low growth and recession during most of the second half of the 1920s, due largely to Winston Churchill’s bold decision to return to the gold standard with an overvalued pound. Germany entered a downturn early in 1928 and then steadied before turning down in the third quarter of 1929. A number of countries in Latin America fell into depression in late 1928 and early 1929. France recorded a short downturn in the early 1930s then recovered and fell dramatically between 1933 and 1936.[xli] Canada’s Depression had approximately the same timing and severity as the U.S.’s.[xlii]
In the spring of 1932, in response to the urging of Eugene Meyer, the new chairman of the Federal Reserve Board, the Hoover administration and Congress created legislation to form the Reconstruction Finance Corporation and to allow government securities as eligible assets to back currency. [xliii] The Federal Home Loan Bank Act was passed. The Federal Reserve adopted a clear expansionary monetary policy which created a noticeable recovery in real output. Industrial production rose 12 percent in the four months between July and November 1932, as the Dow Index hit its Depression era low of 41.22. However, this monetary expansion ceased when Congress adjourned and the Federal Reserve returned to its policy of caution prior to the elections. In February 1933, the final wave of banking panics pushed the economy back into depression. Only in April 1933 did the American recovery begin in earnest.[xliv]
Romer explains, “Recovery in the United States from the Great Depression has been alternatively described as very fast and very slow. It was very rapid in the sense that the growth rate of real output was very large in the years between 1933 and 1937 and after 1938. … Real GNP grew at an average rate of nearly 10 percent per year in the four years between 1933 and 1937, and again in the three years after the recession of 1937 and the United States entering World War II in December 1941. The recovery was nevertheless slow in the sense that the fall in output in the United States was so severe that, despite these impressive growth rates, real GNP did not return to its pre-Depression level until 1937 and its pre-Depression growth path until around 1942.”[xlv]
Contrary to conventional thinking, World War II was not the primary source of the American recovery, as the unemployment rate was still nearly 10 percent as late as 1941 before dropping to less than two percent durning the war. Neither fiscal policy by the presidential administrations nor monetary policy by the Federal Reserve System contributed measurably to the recovery. Instead, recovery can be credited to the increase in the money supply, which was primarily due to a gold inflow, which was in turn due to the revaluation of gold in 1933 and 1934 and a capital flight from Europe resulting from the region’s political instability after 1934. The expansion of the monetary regime stimulated capital goods consumption by generating expectations of future monetary ease, inflation, and real economic growth.[xlvi]
One may ask, then, if it took more than 70 years for the scholars to understand the role played by the gold standard as a cause of the Depression, how could Franklin D. Roosevelt have known that a devaluation of the dollar in 1933 and 1934 would ignite the recovery from the Depression?
In desperation, both Presidents Herbert Hoover and Franklin D. Roosevelt knew they had to find a way to stop the deflation and get prices up. Franklin Roosevelt’s secretary-of-state designate Henry A. Wallace (son of Coolidge’s secretary of agriculture, later elected vice president of the U.S.) had argued the benefits of Britain’s 1931 devaluation but encountered universal opposition from the Secretary of Treasury, the Federal Reserve, and the nation’s most influential private bankers. But important new information came to light. George Warren, a professor of farm management at Cornell and former acquaintance of Governor Roosevelt, had chanced upon a remarkable discovery. In his 1932 exhaustive survey of 213 years of wholesale prices, Warren had found a strong correlation between world commodity prices and the global supply of gold. When large gold discoveries came onto the world market, global commodity prices tended to rise. Essentially, a 50 percent increase in the price of gold (via devaluation of the dollar which increased money supply) was no different in its effects from suddenly discovering 50 percent more of the metal. While risky, if the hypothesis were true, devaluation could act as a powerful stimulus for getting prices up.[xlvii] Anticipation of such a move created ripples of concern.
In President Roosevelt’s celebrated “first hundred days” he bombarded Congress with New Deal legislation, including the Agricultural Adjustment Act. Buried in the Act was a last-minute “Thomas amendment” allowing the president to devalue the dollar against gold by up to 50 percent. Going off gold was the best way to lift prices. Roosevelt’s decision to do so rocked the financial world.[xlviii]
The blizzard of New Deal legislation had essentially changed numerous variables in hopes of finding something that would work. Only in retrospect was it discovered that the devaluation had been the prime instrument of recovery while other New Deal programs did not materially support the recovery. In 1989, Bernanke and Martin Parkinson, of Princeton, state that, “the New Deal is better characterized as having ‘cleared the way’ for a natural recovery … rather than as being the engine of recovery itself.” The only aggregate-demand stimulus that J. Bradford De Long and Lawrence H. Summers, of Harvard, thought might have contributed to the recovery was World War II, and they concluded that “it is hard to attribute any of the pre-1942 catch-up of the economy to the war.” [xlix]so concludes that the fiscal policies during the 1930s were flawed.[l]
Cataloguing the Evidence
Anyone and everything associated with the economy came under intense scrutiny. Solving the mystery of the Depression’s cause became the Holy Grail for the world’s elite scholars, economists, and historians. The following pages detail the cumulative process of identification. A listing of source material is provided for readers who would like to explore the Depression in further detail.
As mentioned earlier, in 1963, Milton Friedman and Anna J. Schwartz published A Monetary History of the United States, 1867–1960, which alleged that the U.S. Federal Reserve System’s policy mistakes were central to the severity and length of the Great Depression. They identified at least four distinct “exogenous” episodes: the “antispeculative” tightening of 1928 to 1929;[li] a contraction in October 1931 which provoked “spectacular” bank runs;[lii] an episode in April 1932 of easing monetary policy due to Congressional pressure;[liii] and the period from January 1933 to March 1933 between President-elect Franklin D. Roosevelt’s election and inauguration.[liv] These “natural experiments,” in addition to “cross sectional” evidence based on differences in exchange rate regimes across countries in the 1930s, offer evidence of the role of monetary forces in the Depression.
Inevitably, in the absence of any single well-defined statutory objective, conflicts developed between discretionary objectives of monetary policy. The two most important arose out of the re-establishment of the gold standard abroad and the emergence of the bull market in stocks. …
The bull market brought the objective of promoting business activity into conflict with the desire to restrain stock market speculation. The conflict was resolved in 1928 and 1929 by adoption of a monetary policy not restrictive enough to halt the bull market yet too restrictive to foster vigorous business expansion. The outcome was in no small measure a result of the internal struggle for power within the System which followed the death of Benjamin Strong in October 1928. How to restrain speculation became the chief bone of contention. … A stalemate persisted throughout most of the crucial year 1929, which not only prevented decisive action one way or the other in that year but also left a heritage of divided counsel and internal conflict for the years of trial that followed.
The economic collapse from 1929 to 1933 has produced much misunderstanding of the twenties. The widespread belief that what goes up must come down and hence also that what comes down must do so because it earlier went up, plus the dramatic stock market boom, have led many the suppose that the United States experienced severe inflation before 1929 and the Reserve System served as an engine of it. Nothing could be further from the truth. By 1923, wholesale prices had recovered only a sixth of their 1920-21 decline. From then until 1929, they fell on the average of 1 percent per year. … The stock of money, too, failed to rise and even fell slightly during most of the expansion—a phenomenon not matched in any prior or subsequent cyclical expansion. Far from being an inflationary decade, the twenties were the reverse.[lv]
“Benjamin Strong, more than any other individual, had the confidence and backing of other financial leaders inside and outside the System, the personal force to make his own views prevail, and also the courage to act upon them.”[lvi] Friedman elaborates, as recently as 2000, that, “in [his] considered opinion, had Benjamin Strong lived two or three more years, the nation may very well not have had a Great Depression. … They [Federal Reserve System] did know better.”[lvii]
Friedman and Schwartz’s postulate inspired contemporary economists to build on its findings. New econometric research rigorously tests and enriches the theories of cause and effect.
In 1970, Lester V. Chandler, of Princeton, finds that when deflation started in 1930, farmers were hit hard by sharply lower commodity prices and were among the first to default which sent undiversified rural banks into failure. The unique conjunction of undiversified banking and a particularly large increase in agricultural indebtedness made the financial panics in the United States both more severe and more persistent than in other countries.[lviii]
In 1973, Charles P. Kindleberger, of M.I.T., asserts that the depression was a worldwide phenomenon in origin and interaction rather than an American recession that spilled abroad. He concludes that the world economic system was rendered unstable by British inability and U.S. unwillingness to assume responsibility for maintaining open markets for distressed goods; providing stable long-term lending; stabilizing exchange rates; coordinating macroeconomic policies; and acting as a lender of last resort in providing liquidity in financial crisis. France should not have been allowed to destabilize the system.[lix]
In 1976, Peter Temin dissects the arguments of earlier hypotheses and is underwhelmed, arguing that “the economic collapse itself has suffered a form of intellectual neglect … economists have left the study of the Depression to others.” He concludes that both the money and spending hypotheses have serious flaws and that insufficient data supports them.[lx] Needless to say, in 1977, Temin’s critique receives harsh criticism itself from other economists.[lxi]
Friedman and Schwartz (1963) explained that the general economic contraction was worsened by the difficulties of the banks: first, by reducing the wealth of bank shareholders and, second, by leading to a rapid fall in the supply of money. In 1983, Bernanke adds that nonmonetary factors were at work as well. The disruptions of 1930 to 1933 reduced the effectiveness of the financial sector as a whole. The nontrivial costs of intermediation, that of market-making and information-gathering services, increased and borrowers (especially households, farmers and small firms) found credit both expensive and difficult to obtain. The effects of this credit squeeze on aggregate demand helped convert the severe but not unprecedented downturn of 1929–30 into a protracted depression.[lxii]
In 1985, Eichengreen and Jeffrey D. Sachs, of Harvard, suggest that currency depreciation in the 1930s was clearly beneficial for the initiating countries. They then establish that foreign repercussions of individual devaluations did have “beggar-thy-neighbor” effects. However, if devaluation were taken by the group of countries as a whole, adopted even more widely, and coordinated internationally, it would have hastened economic recovery from the Great Depression.[lxiii]
In 1987, James D. Hamilton argues that monetary policies could not have been the only reason for the 1929–1930 downturn; “the magnitude of the stock market crash and the initial collapse of industrial production suggest that even before the first banking crisis of November–December 1930, the U.S. was facing a more serious recession than in 1921.” He concludes that, “a model that stresses the destabilizing consequences of unanticipated deflation, increased real service costs of outstanding nominal debts, and the real effects on the financial system of the banking panics seems needed to understand the contribution of monetary policy to the events after 1930.”[lxiv]
In 1988, he describes how the precarious status of government debts and international finance during the 1920s rendered a gold standard vulnerable to the volatility that made the 1931 downturn more severe. [lxv]
In 1989, Temin takes a position that: “The origins of the Great Depression lie largely in the disruptions of the First World War. Its spread owes much to the hostilities and continuing conflicts that were created by the Treaty of Versailles.” He refers to Churchill’s concept of a “Thirty Years’ War”[lxvi] and argues that the “interwar” economy was subject to major deflationary shocks. He assigns a primary role to tight money policy in the late 1920s, which was due to the adherence of policymakers to the ideology of the gold standard.
Temin maintains that an important element of the Depression was its international character. The major industrial countries were highly interdependent. “Stories that deal only with one country have trouble finding causes for the Depression commensurate with its severity. The origins of the Depression lay in the interaction of exchange rates and international capital movements. Its continuation lay in the transmission of its currency crises and banking panic. … It was hard for any single country to expand on its own.”[lxvii]
Temin’s argument mirrors concerns expressed by British macroeconomist John Maynard Keynes, who in 1919 predicted World War II.[lxviii] Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard as it ran counter to the need for domestic policy autonomy.[lxix]
In 1990, Romer explores the dichotomy that economists often impose between the Great Crash and the Great Depression and states the case that the downturn in real output began in August 1929 and accelerated dramatically after the collapse of stock prices. Romer argues that the crash caused consumers to become temporarily uncertain about future income and choose to delay current spending on durable goods. This decline in spending then drove down aggregate income.[lxx]
In 1991, Bernanke and Harold James investigate the waves of bank failures during 1930 to 1933 that culminated in the shutdown of the banking system (and of a number of other intermediaries and markets in March 1933). Notably an apparent attempt at recovery from the 1929 to 1930 U.S. recession was stalled at the time of the first banking crisis (November 1930 to December 1930) and degenerated into a new slump during the mid-1931 panics.[lxxi] There may have been a feedback loop through which banking panics, particularly those in the U.S., intensified the worldwide deflation. [lxxii]
They further conclude that recent research on the causes of the Great Depression has largely blamed that catastrophe on the international gold standard. They affirm Temin’s (1989) findings that the gold standard’s “rules of the game” made an international monetary contraction and deflation almost inevitable. Bernanke and James acknowledge Eichengreen and Sachs’ (1985) evidence that countries that abandoned the gold standard and the associated contractionary monetary policies recovered from the Depression more quickly than countries that remained on gold. The close correspondence (across both space and time) between deflation during the late 1920s and early 1930s strongly suggests a monetary origin. The relationship between deflation and nations’ adherence to the gold standard shows the power of that system to transmit contractionary monetary shocks. High correlation between deflation (falling prices) and depression (falling output) helps illustrate the mechanisms by which deflation may have induced depression in the 1930s.[lxxiii]
In 1991, Harold Bierman, Jr., of Cornell, views the 1929 stock market crash from the investment perspective. He revisits stock market prices and analyzes the profitability and dividend policies of corporations, as well as margin buying, probability, and short selling. During 1928 the price earnings ratio for 45 industrial stocks increased from approximately 12 to approximately 14. It was over 15 in 1929 for industrials and then decreased to 10 by the end of 1929. (Government bonds in 1929 yielded 3.4 percent and industrial bonds were yielding 5.1 percent.)
There were good reasons for thinking that the stock market was not obviously overvalued in 1929 and the crash was not inevitable. Bierman explains why the prevailing “war on speculation” was not constructive in reinforcing general confidence. The economic fundamentals were strong. He feels that the stock market crash resulted more from the misjudgments and bad decisions of good people than the evil actions of a few profiteers. There were solid reasons for buying stock in October 1929, but the market sentiment soon shifted from optimism to pessimism, and the negative psychology of the market became more important than the underlying economic facts. [lxxiv] [lxxv]
Irving Fisher, of Yale, the most prominent American economist of the time and worth $10 million—all of it in the stock market—declared in 1929, “Stock prices are not too high, and Wall Street will not experience anything in the nature of a crash.” On Tuesday, October 15, 1929, he further stated, “Stocks have reached what looks like a permanently high plateau.” [lxxvi]
In 1992, Eichengreen formalizes his thesis entitled, Golden Fetters: The Gold Standard and the Great Depression, 1919–1939, which documents the catastrophe of the global Depression phenomenon in careful detail. Eichengreen asserts that the gold standard is conventionally portrayed as synonymous with financial stability, but precisely the opposite is true. He describes why the interwar gold standard worked so poorly when its prewar predecessor had worked so well.[lxxvii]
Echengreen states that the problems with the operation of the gold standard and the unprecedented rise in unemployment compounded and reinforced one another. The downward spiral of output and employment in 1929 exacerbated the difficulty of operating the gold standard. But, a point came where the collapse of output and employment had proceeded so far that the gold standard could no longer be supported. Once its provisions were finally removed from the international scene, economic recovery could commence.[lxxviii]
Eichengreen goes on to confirm that Benjamin Strong’s influence proved pivotal in developing confidence in the sensitive, intricate, coordination with the other central bankers. Because of the U.S.’s position as a large creditor nation, Strong’s judgment, skill, and insight were critical in making trusted decisions that helped achieve the U.S. fiscal and monetary policy objectives, but at the same time facilitated other countries to achieve theirs as well. Strong, the former president of Bankers Trust and inside member of the Wall Street elite, had established tight working relationships with the heads of the other central banks, especially Montagu Collet Norman of the Bank of England, Hjalmar Schacht of Germany’s Reichsbank, and Aime Hilaire Emile Moreau of Banque de France.[lxxix]
It is noteworthy that Strong fully appreciated the downside for tightening credit as a tool for controlling speculation in the stock markets.[lxxx] As described by Chandler in 1958, Strong stated:
I think the conclusion is inescapable that any policy directed solely to forcing liquidation in the stock loan account and concurrently in the prices of securities will be found to have a widespread and somewhat similar effect in other directions, mostly to the detriment of the healthy prosperity of this country.[lxxxi]
Andrew Mellon likewise said privately: “When the American people change their minds, this speculative orgy will stop but not before.”[lxxxii]
Eichengreen addresses the critical evolution and fiscal impact of unemployment, wages, work hours, and other social issues. Unions and more socialized governments gave a stronger voice to the growing clamor for social change and materially influenced the decisions of the world’s central banks and policymakers. No understanding of the Great Depression would be complete without recognizing the huge influences of unemployment and labor unrest.[lxxxiii]
In 1992, Romer illustrates that the rapid rates of growth in real output in the mid- and late 1930s were largely due to conventional aggregate-demand stimulus, primarily in the form of monetary expansion. Her calculations suggest that any self-correcting response of the U.S. economy to low output was weak or nonexistent in the 1930s.
There is cause to believe that aggregate-demand developments, particularly monetary changes, were important in fostering the recovery from the Great Depression. Money supply grew at an unprecedented average of nearly 10 percent per year between 1933 and 1937 and at an even higher rate in the early 1940s. This was primarily due to a gold inflow, which in turn resulted from the devaluation of the dollar during 1933 and 1934 and to a capital flight from Europe because of political instability after 1934.[lxxxiiv]
In 1993, Romer states that while adherence to the gold standard was probably not the main factor behind the change in U.S. monetary policy in 1928, it was a crucial factor in determining the response of other countries. She re-emphasizes that net exports, which accounted for just 2 percent of the total decline in real GNP, had little impact on the U.S. economy. [lxxxv] While the Smoot-Hawley Tariff may not have been a major factor in causing the Depression, the very discussion of it could very likely have undermined confidence and contributed to the subsequent stock price declines and the Great Depression.[lxxxvi]
In 2000, Ben S. Bernanke writes: The new gold standard research allows the assertion that monetary factors played an important causal role, both in the worldwide decline in prices and output and their eventual recovery.[lxxxvii] He describes the most significant recent development was the change from a traditional emphasis on events in the United States to a more comparative approach that examines the experiences of many countries simultaneously. Further he writes: “First, while … shocks to the domestic U.S. economy were a primary cause of both the American and world depressions, no account of the Great Depression would be complete without an explanation of the worldwide nature of the event, and of the channels through which deflationary forces spread among countries. Second, by effectively expanding the data set from one observation to twenty, thirty, or more, the shift to a comparative perspective substantially improves our ability to identify … the forces responsible for the world depression. Because of its potential to bring the profession toward agreement on the causes of the Depression … I consider the improved identification provided by comparative analysis to be a particularly important benefit of that approach.”[lxxxviii]
Bernanke continues that a reasonable compromise position, adopted by many economists, was that both monetary and nonmonetary forces were operative at various stages. “Nevertheless, conclusive resolution of the importance of money in the Depression was hampered by the heavy concentration of the disputants on the U.S. case—one data point.
“Since the early 1980s, however, a new body of research on the Depression has emerged which focuses on the operation of the international gold standard during the interwar period. … Methodically, as a natural consequence of their concern with international factors, authors … brought a strong comparative perspective into research on the Depression … with implications that extend beyond the question of the role of gold standard. … The new gold standard research allows the assertion with considerable confidence that monetary factors played an important causal role, both in the worldwide decline in prices and output and their eventual recovery.”[lxxxix]
In 2002, Bernanke honors Milton Friedman in Chicago: “The brilliance of Friedman and Schwartz’s work on the Great Depression is not simply the texture of the discussion or the coherence of the point of view. Their work was among the first to use history to address seriously the issues of cause and effect in a complex economic system, the problem of identification. Perhaps no single one of their ‘natural experiments’ alone is convincing; but together, and enhanced by the subsequent research of dozens of scholars, they make a powerful case indeed.
“What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilizing direction, can be extremely powerful.”[xc]
Did Calvin Coolidge know that the crash was coming?
On January 7, 1933, following the death of President Coolidge, Will Rogers, the humorist and political observer, wrote these simple but profound words:
Here is a thing do you reckon Mr. Coolidge worried over in late years? Now he could see further than any of these politicians. Things were going so fast and everybody was so cuckoo during his term in office, that lots of them just couldent possibly see how it could ever do otherwise than go up. Now Mr. Coolidge dident think that. He knew that it couldent. He knew that we couldent just keep running stocks and everything else up and up and them paying no dividends in comparison to the price. His whole fundamental training was against all that inflation. Now there was times when he casually in a speech did give some warning but he really never did come right out and say, ”Hold on there, this thing cant go on! You people are crazy. This thing has got to bust.”
But how could he have said or done that? What would have been the effect? Everybody would have said, “Ha, what’s the idea of butting into our prosperity? Here we are going good, and you our President try to crab it. Let us alone. We know our business.”
Now here is another thing too in Mr. Coolidge’s favor in not doing it. He no doubt ever dreamed of the magnitude of this depression. That is he knew the thing had to bust, but he dident think it would bust so big, or be such a permanent bust. Had he known of the tremendous extent of it, I’ll bet he would have defied hell and damnation and told and warned the people about it. …
Now on the other hand in saying he saw the thing coming, might be doing him an injustice. He might not. He may not have known any more about it than all our other prominent men. But we always felt he was two jumps ahead of any of them on thinking ahead.[xci]
Setting the Record Straight
So there you have it. Monetary factors played an important causal role of the Great Depression. There is strong evidence that the Federal Reserve System overrode the objections of the chronically ailing Governor Benjamin Strong. Despite clear signals of softness in the U.S. economy in the summer of 1928, the System continued to tighten credit to curtail “speculation” in stocks. This action unwittingly unleashed the very domino effect envisaged by Strong. A resulting shift in policy worldwide, and not merely the relatively modest shift in the United States, then provoked the contractionary impasse that set the stage for the 1929 downturn. The minor shift in American policy had such dramatic effects because of the foreign reaction it created through its intersection with existing imbalances in the pattern of international settlements, as well as with the gold standard constraints. These events caused a tightening of fiscal policies in parts of Europe and much of Latin America. Superimposed on already weak foreign balances of payments, these events triggered a greatly magnified monetary contraction abroad,[xcii] which ushered in the Great Depression.
Admittedly, there were factors at work that may have led to a normal downturn in the business cycle in 1928 and 1929—overexpansion in the 1920s, lower consumption and other signs of softness in the domestic economy, and an overly zealous run-up in prices on the stock markets celebrating President Hoover’s election. Hoover’s personality and style were very different. [xciii] Numerous microeconomic factors contributed to the diminishing optimism and confidence in the future prospects of America in 1929, but these factors were not the driving forces responsible for the Great Contraction. Very possibly the Federal Reserve’s actions could have significantly minimized the effects of recession,
In hindsight, could Coolidge possibly have anticipated the role and limitations of the new gold standard in the interwar period and proactively taken corrective measures? Coolidge’s top legislative priority was to normalize the U.S. economy. The Coolidge era “marked the greatest peacetime involvement in world affairs in American history.”[xciv] Coolidge had not the slightest hesitation about restoring fixed rates within an international gold standard regime. The U.S. economy was thriving. World trade and international financial transactions had increased markedly. The nation’s ample gold reserves stood ready to underwrite continued growth. The gold standard had been officially recognized by Congress in the Gold Standard Act of 1900. It was the law of the land.
Almost all the world’s currencies had depreciated relative to gold during the war years as nations had no choice but to print money without gold backing. After a period of floating exchange rates, countries had to choose between two painful options—either to devalue or to deflate their currencies relative to gold. The choice was like that of an overweight person—going on a diet (deflation) or having one’s clothes altered (devaluation).[xcv] Each had its drawbacks. A League of Nations conference held in Brussels in 1920 was followed up by a meeting in Genoa in 1922 to set fixed exchange rates. Britain opted for rigid sacrifice and belt tightening while France chose a devaluation strategy. The U.S., which had gone through a sharp deflation in 1919 and 1920 and had adequate gold backing, comfortably held the dollar at its prewar exchange rate to gold.[xvi] No major politician in the U.S. questioned the gold standard in the 1920s as the best method for inspiring trust, stability, and discipline in the system. Coolidge and Mellon had lived through financial panics and swings in business cycles and understood the vital role that gold could play in stabilizing world currencies. Other nations were covetously pursuing strategies to return to gold.
President Coolidge had no jurisdiction over the stock exchanges in the cities throughout America—the two largest of which, in New York City, were chartered in New York and subject to the laws of the State of New York. Coolidge had no approval authority over the Federal Reserve System. Its authority was derived from statutes enacted by the U.S. Congress and the System was subject only to Congressional oversight. Coolidge worked easily within that framework, though, as he judged people by the consequences of their acts. [xcvii] Benjamin Strong’s experience and skill in dealing with the intricacies of international monetary policy were clearly acknowledged and respected. Coolidge relied on Strong’s unique ability to strike the delicate balance of encouraging economic growth and price stability in the United States while bolstering the financial reconstruction of Europe.
Should President Coolidge have committed the U.S. to underwrite stability by committing to a global program for reconstruction or currency stabilization? Europe was in shambles. The peace treaties following World War I left a burdened world economy still recovering from the effects of war with a gigantic overhang of international debts.[xcviii] The U.S. refused to be a party to the Treaty of Versailles. The major powers were hopelessly devastated by the war and especially Germany, France, and Belgium had been plagued with fragile and volatile currencies.[xcix] Floating exchange rates during and after the war were unnerving, unpredictable, and totally unsuitable as a basis for growing world trade. There was universal agreement among bankers that the link to gold was the best defense in the downward spiraling value of money.
The world was blindsided. No world leader was aware of the looming monetary consequences of the world’s evolving new social order. America was an outsider and was viewed as a newcomer to the stage of world politics. Britain, France, and Germany had deeply rooted adversarial histories. Each established exchange rates to suit its internal social, labor, and political agenda with little coordination or regard for the wider system. [c] While the efforts of the United States were substantial, they could not overcome the deep emotions of Europe’s dysfunctional governments. Benjamin Strong played a leadership role in facilitating between the feuding countries. But the United States, careful not to be sucked into the vortex, was unable to prevent the vying nations from wrangling for self-interest, autonomy, and position—the “beggar-thy-neighbor” solution. The world was unable to gauge the contractionary impact of U.S. and France’s gold accumulation which was undermining the effectiveness of the entire regime. France’s gold reserves increased astonishingly from seven percent of the world’s supply in 1926 to 27 percent in 1932. The U.S.’s gold dropped from 45 percent to 34 percent of the world’s supply during this period.[ci] Latin America and the Far East lost over $800 million in gold, [cii] which caused further exchange depreciation. A “money multiplier”, which had historically provided the liquidity necessary for world commerce, inadvertently worked in reverse and contracted the world’s money supply.
During the Coolidge presidency, the U.S. asserted leadership in facilitating the “Dawes Plan.” Chicago banker Charles G. Dawes together with Owen D. Young, c.e.o. of General Electric, led an international committee to use an ingenious mechanism which restructured Germany’s war reparation payments and led to an immediate, though interim, German recovery.[ciii] The U.S. wrote down the French war-debt by 60 percent to $1.6 billion in the spring of 1926. Loans to other European nations were restructured and cancelled. War debts festered as a political sore but never posed an economic problem.[civ] The U.S. arranged large loans to facilitate Britain’s return to the gold standard. In aggregate the U.S. banks loaned over $15 billion dollars of virtually unsecured credit to Europe, which far exceeded America’s $4 billion in gold reserves. (To grasp the significance of this exposure, adjusted for the relative size of economies, that debt would equate to over $3.0 trillion dollars today.[cv] ) Even that was not enough for the seemingly insatiable needs of the debtor nations.
Benjamin Strong felt it was in the United States’ interest to use its huge resources to help rebuild a fractured Europe. Coolidge agreed with that principle. As the gold standard evolved in the new era, it became a straitjacket that restricted capital from flowing back to an illiquid, under-financed Europe. Like a child outgrowing its shoes, the world needed a new fit. Following the Great Crash a visionary leader like Strong could very likely have found a way to counteract the global deflation. (For instance, at Bretton Woods in 1944, Maynard Keynes suggested a less rigid regime with “pegged but adjustable” rates that allowed flexibility for countries as their economic circumstances changed.) Instead, due to the rigidity of their central banking and the shortage of the world gold supply, the major powers failed one by one. Even the U.S. was battered enough by 1933 that it revalued its gold by 40 percent, which jump-started recovery from the Depression. Breaking with the gold standard was the key to economic survival.
The failure of international monetary conferences in the 1870s, 1920s, and 1970s exemplifies the inability to reaching agreements to shift the monetary system from one trajectory to another. Monetary regimes evolve at their own momentum. Reforming them constitutes a collective endeavor. [cvi] “…[I]t is a mistake to believe that a gold standard is an institutional arrangement that can by itself correct for a lack of monetary and fiscal discipline.”[cvii] It is unrealistic to assume that even a president of the United States at that time could have anticipated the cascading events that led to the Depression and have had the power to change the world monetary regime in time to avert it.[cviii]
One could argue that Coolidge could have proactively set up a safety net in anticipation of possible unemployment and bank defaults. However, the Coolidge economy was stable and growing. Preparing for a catastrophic worldwide collapse during a time of exceptional prosperity did not rank as a high national priority. Job creation resolved unemployment concerns; banks and corporations were generally well financed. The Federal Reserve System and open market operations worked effectively and had been strengthened and refined by their successful use. The U.S. had accumulated a reserve of gold.
The Presidential Conference on Unemployment in 1921 led to a successful plan that emphasized local and community solutions. A Bureau of Unemployment was created to partner private and voluntary organizations with local, state, and federal agencies to resolve inequities in economic conditions. Coolidge stressed personal savings, caution, and the importance of “the things that are unseen”—spiritual, moral, cultural, and religious ideals; character.[cix] The president was elected by an overwhelming majority of Americans that mandated self-determination, personal freedom, a free enterprise system, and limited government. To give individuals more freedom to make their own choices, Coolidge reduced taxes. It was that freedom that fueled the Coolidge prosperity.
Perhaps Coolidge could have done a better job in dealing with agricultural issues. High prices for agricultural commodities, combined with readily available mortgage financing, had ignited a “land boom” in farm states during World War I. Land values were driven to unsustainably high levels. Following the war, demand for agricultural products plummeted. Lower prices, farm automation, high local taxes, and productivity enhancements combined to create severe economic problems on American farms. [cx]
During the war Europe had embraced non-traditional centers of agricultural production in Latin America and Australia which remained as new competitors. After 1929, these small nations scrambled for liquidity and were forced to sell their crops for whatever they would bring. Commodity prices world-wide plunged. [cxi]
Coolidge twice vetoed the McNary-Haugen Farm Bill, in 1927 and again in 1928, because he felt it fixed prices and was unconstitutional. [cxii] Coolidge favored a longer-term, more orderly, and scientific free-market solution utilizing farm cooperatives and providing credit facilities. He endorsed programs that would help the small farms and not just the large one-crop farms and special interests. He eschewed the temporary relief of burdensome government supply-and-demand management through an artificial scheme of acreage allotments, loan levels, price supports, and export subsidies that would encourage greater overproduction. [cxiii]
The Coolidge prosperity created millions of jobs for farm workers leaving the farms, thereby easing the way for America’s exceptional agricultural productivity that led to American leadership in world agribusiness. Commodity prices had risen during 1928 and farmers, with the exclusion of wheat farmers, fared better.
In the final analysis, the Coolidge administration deserves high praise for its role in transforming the U.S. economy to one of prosperity. The reduction in the national debt from $22.3 billion in 1923 to $16.9 billion in 1929—in 2009 dollars and adjusted for the sizes of the economies this would be equivalent to a debt reduction of $1.08 trillion today [cxiv]—was only possible with a rigorous blend of: 1) courageous cuts in federal government spending[cxv] and 2) strategic cuts in tax rates to jump-start the economy and attract the private investment capital needed by cash-starved industries seeking to serve the needs of a pent-up marketplace. Paul Johnson opined, “The Coolidge Prosperity was huge, real, widespread though not ubiquitous, and unprecedented. It was not permanent—what prosperity ever is?” [cxvi]
The Federal Reserve during the Coolidge administration successfully pioneered and refined open market operations which mitigated the impact of the 1924 and 1927 recessions. The skillful coordination with the Federal Reserve, together with disciplined fiscal decision-making, inspired the nation’s confidence and helps define the presidency of Calvin Coolidge.
Coolidge prosperity created the stable platform and reserve from which America survived the Depression. It provided the base from which the country was able to employ its powerful agricultural and industrial complex. That strength ultimately allowed America to help re-establish world peace.
While devastating, as Andrew Mellon noted on his 80th birthday in 1935, the Depression would prove a mere “bad quarter of an hour” in the glorious history of American finance.[cxvii] And so it did.
I am deeply grateful to Roger Brinner for his directional advice and much needed pointers. I thank Amity Shlaes for her encouragement and assistance in rejuvenating this important field of study. I am especially indebted to Jerry L. Wallace, Harold Bierman, Jr., Roby Harrington III, Richard A. Marin, David E. Hudson, David R. Serra, and members of the Kirby family, Jean, Peter, and Rob, who have patiently read drafts and offered significant editorial guidance and help. Any assumptions, errors, and conclusions, however, are strictly my own.
Robert P. Kirby is a former business executive and former Chairman of the Board of Trustees of the Calvin Coolidge Memorial Foundation from 2009 to 2011.
Bridgewater, VT. November 13, 2012
[i] Calvin Coolidge, First Annual Message to the Congress, December 6, 1923. http://www.coolidgefoundation.org/resources/speeches-as-president-1923-1929
[ii] Amity Shlaes, “Silenced Cal and His Economy,” The New England Journal of History, Vol. 68, No. 2, Spring 2012, pp. 3–11. http://www.coolidgefoundation.org/resources/2010-jfk-symposium-2
[v] Amity Shlaes, “Silenced Cal and His Economy,” The New England Journal of History, Vol. 68, No. 2, Spring 2012, pp. 3–11. http://www.coolidgefoundation.org/resources/2010-jfk-symposium-2
[vi] Joseph J. Thorndike, “A Tea Party for Calvin Coolidge?” The New England Journal of History, Vol. 68, No. 2, Spring 2012, p. 86. http://www.coolidgefoundation.org/resources/2010-jfk-symposium-11
[xiii] Christina D. Romer, Encyclopedia Britannica, December 20, 2003. http://elsa.berkeley.edu/~cromer/great_depression.pdf
[xvii] Ben S. Bernanke, Conference to Honor Milton Friedman, University of Chicago, Chicago, November 8, 2002. http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm#f3
[xviii] Milton Friedman, WorldNet, March 19, 2008. http://www.pbs.org/fmc/interviews/friedman.htm
[xxiii] Douglas A. Irwin, “Did France Cause the Great Depression?” National Bureau of Economic Research Working Paper 16350, September 20, 2010. http://www.cato.org/multimedia/events/french-gold-sink-great-depression
[xli] Christina D. Romer, Encyclopedia Britannica, December 20, 2003. http://elsa.berkeley.edu/~cromer/great_depression.pdf
[xlii] Ben S. Bernanke and Ilian Mihov, “Deflation and Monetary Contraction in the Great Depression: An Analysis by Simple Ratios,” Essays of the Great Depression, Princeton, NJ: Princeton University Press, 2000, p. 115.
[lvii] Milton Friedman, WorldNet, March 19, 2008. http://www.pbs.org/fmc/interviews/friedman.htm.
[lxi] Arthur E. Gandolfi and James R. Lothian, “Did Monetary Forces Cause the Great Depression? A Review Essay,” Journal of Money, Credit and Banking, Ohio State University Press, Vol. 9, No. 4, November 1977, pp. 679–691.
[lxxi] Ben S. Bernanke and Harold James, “The Gold Standard, Deflation, and Financial Crisis in the Propagation of the Great Depression: An International Comparison.” In Hubbard, R. Glenn, ed., Financial Markets and Financial Crises. Chicago: University of Chicago Press for NBER, 1991, pp. 35–68.
[xc] Ben S. Bernanke, At the Conference to Honor Milton Friedman, University of Chicago, Chicago, November 8, 2002. http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm#f3
[xciii] George H. Nash, “The ‘Great Enigma’ and the ‘Great Engineer’: The Political Relationship of Calvin Coolidge and Herbert Hoover.” In John Earl Haynes, ed., Calvin Coolidge and the Coolidge Era: Essays on the History of the 1920s. Washington, DC: Library of Congress, 1998, pp. 149–190.
[xciv] Warren I. Cohen, “America and the World in the 1920s.” In John Earl Haynes, ed., Calvin Coolidge and the Coolidge Era: Essays on the History of the 1920s. Washington, DC: Library of Congress, 1998, pp. 233–243.
[xcix] James D. Hamilton, “Comments on ‘The French Gold Sink and the Great Deflation of 1929-32,’” for Cato Papers on Public Policy, Washington, DC: June 7, 2012. http://www.cato.org/multimedia/events/french-gold-sink-great-depression
[ci] Douglas A. Irwin, “Did France Cause the Great Depression?” National Bureau of Economic Research Working Paper 16350, September 20, 2010. http://www.cato.org/multimedia/events/french-gold-sink-great-depression
[civ] Stephen A. Schuker, “American Foreign Policy.” In John Earl Haynes, ed., Calvin Coolidge and the Coolidge Era: Essays on the History of the 1920s. Washington, DC: Library of Congress, 1998, p. 301.
[cvii] James D. Hamilton, “Comments on ‘The French Gold Sink and the Great Deflation of 1929-32,’” for Cato Papers on Public Policy, Washington, DC: June 7, 2012. http://www.cato.org/multimedia/events/french-gold-sink-great-depression
[cix] Calvin Coolidge, The Things That Are Unseen, Wheaton College, Norton, MA, June 19, 1923. http://www.coolidgefoundation.org/resources/speeches-as-vice-president-1921-1923
[cxv] David Pietrusza, “A Standard of Righteousness: The Worldview of Calvin Coolidge,” The New England Journal of History, Vol. 68, No. 2, Spring 2012, pp. 12–25. http://www.coolidgefoundation.org/resources/2010-jfk-symposium-3
[cxvi] Paul Johnson, “Calvin Coolidge and the Last Arcadia.” In John Earl Haynes, ed., Calvin Coolidge and the Coolidge Era: Essays on the History of the 1920s. Washington, DC: Library of Congress, 1998, pp. 1–13.
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