Did France cause the Great Depression?

BEHIND today’s hand-wringing over currency wars is the fear that it’s one small step from currency intervention and capital controls to traditional, noxious protectionism: tariffs, quotas, subsidies, etc. For example, Gerald O’Driscoll at the Cato Institute writes:

After prices fell 10 percent in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a “red cape” and fired the bulls back up.

Douglas Irwin, 20 September 2010A large body of research has linked the gold standard to the severity of the Great Depression. This column argues that while economic historians have focused on the role of tightened US monetary policy, not enough attention has been given to the role of France, whose share of world gold reserves soared from 7% in 1926 to 27% in 1932.

"The euro crisis is certainly not over yet," is how the Bundesbank's Jens Weidmann begins this intriguingly honest interview, adding that, resolution "will take some time." Perhaps his most telling statement comes early on when he explains that "believing that everything is okay now simply because the situation on the financial markets has eased is an illusion and does not help matters," as imbalances remain unresolved.

As initially reported here yesterday, in what is the biggest news of the weeks, and possibly the year, the Bundesbank has broken away from its "all is well" posturing exhibited as recently as three months ago, and in a dramatic reversal of its diplomatic position, has demanded repatriation of some of its NY Fed and all of its Paris-domiciled gold.

There's a new government in Japan, and it appears determined to finally do "whatever it takes" to attempt to revive the moribund Japanese economy, which has struggled with deflation for a decade.

There's a new government in Japan, and it appears determined to finally do "whatever it takes" to attempt to revive the moribund Japanese economy, which has struggled with deflation for a decade.