Author Archives: James_Hamilton

Who anticipated the Great Depression?

Here’s the abstract from a paper by Doug Irwin in the February issue of the Journal of Money, Credit, and Banking:

The intellectual response to the Great Depression is often portrayed as a battle between the ideas of Friedrich Hayek and John Maynard Keynes. Yet both the Austrian and the Keynesian interpretations of the Depression were incomplete. Austrians could explain how a country might get into a depression (bust following a credit-fueled investment boom) but not how to get out of one (liquidation). Keynesians could explain how a country might get out of a depression (government spending on public works) but not how it got into one (animal spirits). By contrast, the monetary approach of Gustav Cassel has been ignored. As early as 1920, Cassel warned that mismanagement of the gold standard could lead to a severe depression. Cassel not only explained how this could occur, but his explanation anticipates the way that scholars today describe how the Great Depression actually occurred. Unlike Keynes or Hayek, Cassel analyzed both how a country could get into a depression (deflation due to tight monetary policies) and how it could get out of one (monetary expansion).

Econbrowser now on WordPress

We have migrated our blog-management system over to WordPress, which will give Econbrowser a slightly different look and help us keep up better with improving technology. For example, by clicking on the appropriate icon that you’ll now find at the end of each post, you can instantly communicate anything you find of interest through other social media such as Facebook and Twitter. Please let us know if you have trouble with any old links, encounter any problems with the new system or have other suggestions.

Thanks to my tech-savvy daughter for helping us to make the switch. You can learn about her company at AdditiveAnalytics.com.

Changes coming for Econbrowser

We will be making some exciting changes to Econbrowser, moving to a new system for managing posts and comments. In preparation for the transition, we have temporarily closed all comments, and at some point during this weekend the complete site may be unavailable. We hope to have a new and better system completely functioning by the end of the weekend, and apologize for the temporary inconvenience.

European monetary policy and the yield curve

From the Economist last week:

Since the financial crisis the European Central Bank (ECB) has ploughed a solitary course, reflecting its unique status as a monetary authority without a state. While other big central banks, notably America’s Federal Reserve, adopted quantitative easing– buying government bonds by creating money– to stimulate recovery, the ECB relied mainly on lowering interest rates and providing unlimited liquidity to banks on longer terms and against worse collateral. But as the Fed phases out its asset-buying programme in 2014, it may be the ECB’s turn to become unorthodox.

By one measure, the ECB may already be there.

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