Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of...
-
Upload
leslie-reeves -
Category
Documents
-
view
213 -
download
0
Transcript of Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of...
![Page 1: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/1.jpg)
Discussion of “The French Gold Stock and the Great Deflation”
James D. Hamilton
University of California, San Diego
![Page 2: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/2.jpg)
Consider an economy with a single produced good (potatoes)
• aggregate price level = P dollars per potato
• relative price of gold = R potatoes per ounce of gold
• dollars per ounce of gold =
dollars potatoes dollars
potato ounce of gold ounce of gold
P RPR
![Page 3: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/3.jpg)
Gold standard: dollars per ounce of gold (PR) is fixed
If relative price of gold (R) goes up, price level (P) must fall
dollars potatoes dollars
potato ounce of gold ounce of gold
P RPR
![Page 4: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/4.jpg)
![Page 5: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/5.jpg)
![Page 6: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/6.jpg)
Monthly wholesale prices 1923-1926
0
50
100
150
200
250
1923 1924 1925 1926 1927
France
US
UK
![Page 7: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/7.jpg)
Monthly wholesale prices 1923-1926
0
50
100
150
200
250
1923 1924 1925 1926 1927
France
US
UK
Belgium
Hyperinflations in Germany, Austria, Poland, Russia, Hungary
![Page 8: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/8.jpg)
![Page 9: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/9.jpg)
1931: European financial distress
• Failure of Austria’s Credit-Anstalt
• Bank runs in Hungary, Czechoslovakia, Romania, Poland, Germany
Depositors outside Berlin bank, 1931
![Page 10: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/10.jpg)
![Page 11: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/11.jpg)
![Page 12: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/12.jpg)
Source: Hamilton (1988)
Private discount rates in Belgium, Switzerland, and France
![Page 13: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/13.jpg)
Source: Hamilton (1988)
Yields on short-term U.S. Treasury securities
![Page 14: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/14.jpg)
Can gold standard restore confidence out of chaos?
• If government not trustworthy without a gold standard, do you trust it to follow a gold standard?
• Britain-- no
• France and U.S.-- yes, but at a cost
![Page 15: Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego.](https://reader036.fdocuments.us/reader036/viewer/2022081603/56649e4f5503460f94b46986/html5/thumbnails/15.jpg)
Source: Bernanke and James (1991)