The Great Depression: An International Disaster of Perverse Economic Policies

If you have no idea what happened to the world economy in the two decades following WW1, then this little book is a great primer. It contains a lovely chronology of events, discusses in a simplistic way how the gold standard actually worked, how the real bills doctrine impeded effective monetary loosening and how Roosevelt prolonged the depression. It's a (mostly) monetarist view and easy to understand at that.On a second read though, 'The Great Depression' becomes very irritating; for three reasons....The first is its changing view of the causes of decline and recovery. It starts out monetarist but ends up closer to the Austrian view that government intervention and socialism prolonged the recovery. You can't be both, although the authors try very hard.The second problem is the use of history. Many historically minded authors have made a big issue of the vicious Versailles Peace Treaty and its role in destabilising the international payments system. Hall and Ferguson hardly mention international issues. Instead, they waffle on about Hitler's evil labour policies, but forget to mention their effect. Huge capital flows left Europe for the New World in the mid-1930s and these played a very significant role in boosting US money supply and spurring recovery.The third problem is the book's very simplistic economics. At the heart of the problem was the issue of real exchange rate adjustment amongst Gold Standard members. The authors make no attempt to explain the extent of the adjustment problems when members faced either hyperinflation or balance of payments deficits after 1918.Countries facing BOP deficits with newly enfranchised labour forces were in no position to use traditional means of real exchange rate adjustment - i.e. deflation - to bring their currencies and payments accounts back into line. Social unrest was everywhere. Impossible strain was placed on domestic economies as interest rates went up. And when Austrian bank, Bank Kredit-Anstalt, failed, the international payments system fell apart and asset prices collapsed. No one had the guts to raise rates to hold currencies within their trading ranges.Hall and Ferguson gloss over the international angle as if it was irrelevant. They could at least have tried to explain why they thought it wasn't important or didn't play a central role.All told, I'd recommend this book to anyone coming across this fascinating period for the first time. But there are much better books out there. Also, parochial books with constant references to us and ours when referring to the US and its institutions are really tiresome to non-US readers.Two stars for the technical bits, the chronology and the details of Roosevelt's New Deal.

Hall and Ferguson do an excellent job of summarizing the mainstream view of economists on why the Depression happened, and those views will surprise some. Was the Depression caused by some structural defect in Capitalism? "No," say Hall and Ferguson. It was due to a combination of economic ignorance, confusion, and incompetence in the Federal Reserve System. The authors do a wonderful job of explaining how the conventional wisdom of the day, the commercial loan theory of banking, led policy makers into a series of blunders that seem incomprehensible today to anyone who knows basic economics. As for the New Deal, Hall and Ferguson argue that except for deposit insurance and gold policy, most of it was irrelevant or counterproductive and contributed only to slowing the recovery after 1933.If you want to read only one book and still understand why the Great Depression happened, read this one.

I have never submitted a "reader's review" to Amazon, but have to add mine here after noting the one negative review below. All the other positive reviewers have it right. This book hits the mark and does exactly what it appears to be designed to do. It is accessible for a broad spectrum of readers, while maintaining a rigorous scholarly standard. And, amazingly, it is an enjoyable read, for both scholars AND graduate and undergraduate students (and maybe the intellectually curious non-fiction reader?). I hope the one rambling (and somewhat odd?) negative review will be dismissed by Amazon visitors. In my opinion, this is a book which should be read by anyone who wants to understand the complex forces and historical context which resulted in the Great Depression.

I have my high school United States History Book still with me. Of that period it says briefly, that there was speculation and the bubble burst on Oct. 29, 1929. Then were was a run on banks but because of fears of inflation the Federal Reserve wanted to keep the market from overheating. So interest rate went up so there was no inflation. The Hoover Administration tried to institute policities that was to no avail, unemployment went up and up. In came, FDR and institutes government programs that put people back to work. But the Supreme Court made it difficult because the court simply declared his programs as unconstitutional. FDR wanted to make changes to the court because he wanted the unemployed to get federal jobs so that they can feed their families. Soon the court came to its senses and gave FDR what he want. People got govenment jobs. Although, unemployment was still high people believed in FDR's enthusiasm and it prevail thru the Great Depression to WWII. In short, FDR save us. That what my book said in brief. My parents and my friends parents believed in FDR. Then Milton Freidman came and wrote about the monetary history of the US. It should that Federal Reserve shrank the money supply by over a third. Over 4000 banks failed because of this. Government programs like the Taft-Hawly Tariff act made things worse buy high tariffs on foreign goods.More government controls, government tax and spending programs made the Great Depression even worse. I urge every parent to read their children's US History books as see for yourself if the myth that FDR save America is there. Thanks to these authors and others were are beginning to see that most of the historical writings about the Great Depression are LIES.