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Golden Fetters: The Gold Standard and the Great Depression, 1919-1939
This book offers a reassessment of the international monetary problems that led to the global economic crisis of the 1930s. It explores the connections between the gold standard--the framework regulating international monetary affairs until 1931--and the Great Depression that broke out in 1929. Eichengreen shows how economic policies, in conjunction with the imbalances created by World War I, gave rise to the global crisis of the 1930s. He demonstrates that the gold standard fundamentally constrained the economic policies that were pursued and that it was largely responsible for creating the unstable economic environment on which those policies acted. The book also provides a valuable perspective on the economic policies of the post-World War II period and their consequences.
480 pages, Paperback
First published May 7, 1992
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857 people want to read
About the author
Barry Eichengreen
107 books133 followersBarry Eichengreen* is the George C. Pardee and Helen N. Pardee Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he has taught since 1987. He is a Research Associate of the National Bureau of Economic Research (Cambridge, Massachusetts) and Research Fellow of the Centre for Economic Policy Research (London, England). In 1997-98 he was Senior Policy Advisor at the International Monetary Fund. He is a fellow of the American Academy of Arts and Sciences (class of 1997).
Professor Eichengreen is the convener of the Bellagio Group of academics and economic officials and chair of the Academic Advisory Committee of the Peterson Institute of International Economics. He has held Guggenheim and Fulbright Fellowships and has been a fellow of the Center for Advanced Study in the Behavioral Sciences (Palo Alto) and the Institute for Advanced Study (Berlin). He is a regular monthly columnist for Project Syndicate.
His most recent books are Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (January 2011)(shortlisted for the Financial Times and Goldman Sachs Business Book of the Year Award in 2011), Emerging Giants: China and India in the World Economy, co-edited with Poonam Gupta and Ranjiv Kumar (2010), Labor in the Era of Globalization, co-edited with Clair Brown and Michael Reich (2009), Institutions for Regionalism: Enhancing Asia's Economic Cooperation and Integration, coedited with Jong-Wha Lee (2009), and Fostering Monetary & Financial Cooperation in East Asia, co-edited with Duck-Koo Chung (2009). Other books include Globalizing Capital: A History of the International Monetary System, Second Edition (2008), The European Economy since 1945: Coordinated Capitalism and Beyond (updated paperback edition, 2008), Bond Markets in Latin America: On the Verge of a Big Bang?, co-edited with Eduardo Borensztein, Kevin Cowan, and Ugo Panizza (2008), and China, Asia, and the New World Economy, co-edited with Charles Wyplosz and Yung Chul Park (2008).
Professor Eichengreen was awarded the Economic History Association's Jonathan R.T. Hughes Prize for Excellence in Teaching in 2002 and the University of California at Berkeley Social Science Division's Distinguished Teaching Award in 2004. He is the recipient of a doctor honoris causa from the American University in Paris, and the 2010 recipient of the Schumpeter Prize from the International Schumpeter Society. He was named one of Foreign Policy Magazine 's 100 Leading Global Thinkers in 2011. He is Immediate Past President of the Economic History Association (2010-11 academic year).
* This is the biosketch available at his faculty page.
Professor Eichengreen is the convener of the Bellagio Group of academics and economic officials and chair of the Academic Advisory Committee of the Peterson Institute of International Economics. He has held Guggenheim and Fulbright Fellowships and has been a fellow of the Center for Advanced Study in the Behavioral Sciences (Palo Alto) and the Institute for Advanced Study (Berlin). He is a regular monthly columnist for Project Syndicate.
His most recent books are Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (January 2011)(shortlisted for the Financial Times and Goldman Sachs Business Book of the Year Award in 2011), Emerging Giants: China and India in the World Economy, co-edited with Poonam Gupta and Ranjiv Kumar (2010), Labor in the Era of Globalization, co-edited with Clair Brown and Michael Reich (2009), Institutions for Regionalism: Enhancing Asia's Economic Cooperation and Integration, coedited with Jong-Wha Lee (2009), and Fostering Monetary & Financial Cooperation in East Asia, co-edited with Duck-Koo Chung (2009). Other books include Globalizing Capital: A History of the International Monetary System, Second Edition (2008), The European Economy since 1945: Coordinated Capitalism and Beyond (updated paperback edition, 2008), Bond Markets in Latin America: On the Verge of a Big Bang?, co-edited with Eduardo Borensztein, Kevin Cowan, and Ugo Panizza (2008), and China, Asia, and the New World Economy, co-edited with Charles Wyplosz and Yung Chul Park (2008).
Professor Eichengreen was awarded the Economic History Association's Jonathan R.T. Hughes Prize for Excellence in Teaching in 2002 and the University of California at Berkeley Social Science Division's Distinguished Teaching Award in 2004. He is the recipient of a doctor honoris causa from the American University in Paris, and the 2010 recipient of the Schumpeter Prize from the International Schumpeter Society. He was named one of Foreign Policy Magazine 's 100 Leading Global Thinkers in 2011. He is Immediate Past President of the Economic History Association (2010-11 academic year).
* This is the biosketch available at his faculty page.
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Displaying 1 - 15 of 15 reviews
April 12, 2015
This is a masterful look at how the failures of the Gold Standard in the 1920s and '30s brought about the Great Depression. Although never stated explicitly, this book is written in the shadow of another National Bureau of Economic Research classic, Milton Friedman and Anna Schwartz's Monetary History of the United States, of which the most famous part deals with the Great Depression. While Friedman and Schwartz focused on domestic problems and pinned the blame for the Depression on the misguided actions of the Federal Reserve, Eichengreen points to the dilemmas of international coordination and the increasingly impossible need to secure gold to back every nation's money supply.
Eichengreen's book begins by showing the deep roots of the Great Depression in World War I. Although many contemporaries attributed the Depression to "misalignments" from the war, Eichengreen actually shows how this happened. First, expansions of political representation and the rise of proportionality of elections during the war, along with the increased presence of the government in everyday life, brought many issues like taxes and wage distribution and unemployment to the forefront of political consciousness, and made every issue potentially debatable. Central banks became important parts of this debate, and therefore could not operate as mere independent managers of money. Financiers lost trust that central banks could always stabilize the gold standard, and this lead to more destabilizing attacks on the currency, both when some currencies were inflating in the 1920s and when they were deflating later. The bad blood from the war also meant central banks did not negotiate with each other to stabilize inflows and outflows like they once did.
Eichengreen provides ample evidence that these changes made the gold standard dangerous where previously it had been stabilizing. France, particularly, with the restrictions on the Banque de France imposed after their extreme inflation (itself caused by political disagreements), kept tightening money supplies from 1929 to 1936, drawing gold from the rest of the world. They did not listen to other pleas to loosen or to lend to countries in distress, partially because they worried about sacrificing tariffs and German reparations in negotiations. France's tightening in turn caused Britain, Belgium, Sweden and others to tighten to defend their currencies, and this consistently shrunk output and lowered employment. It was a vicious cycle, only ending when the countries got off gold and eventually expanded their money supply.
The only problem with the book is that Eichengreen's evidence is weakest where it needs to be strongest, especially in regards to America. For instance, in blaming the lack of gold for the U.S. Federal Reserve's decision to deflate in 1920, thus bringing on the severe early 1920s recession, he provides no numbers indicating the US was lacking in gold and only years old quotes to show it was a concern. Similarly, after Britain left the Gold Standard in September 1931, Eichengreen claims the United States had to deflate to protect its gold stock. Yet he ignores how easy it was for the U.S. to inflate using purchases of bankers acceptances or discounting trade bills that wouldn't reduce gold, and again his quotes showing concern with gold are out-of-date. In other words, in the cases where monetary policy was most important, and where the U.S. Fed dominated international money supply, the Friedman and Schwartz story stands. The Fed (and, for different reasons, the Banque de France) screwed up not because they were low on gold, but because they misunderstood the consequences of their actions. They and the rest of the world suffered those consequences.
But besides its main argument, the book is just a magisterial summary of all the fiscal and monetary actions taken by all the major economies between World War One and the mid-1930s. For anyone who focuses on the United States, the revelations of extremely similar practices at similar times here is eye-opening. Just as the Herbert Hoover created the Federal Farm Board in 1929 to buy up agricultural surpluses and protect farmers' incomes, Brazil created a "Coffee Institute" in 1927, and France created a National Wheat Office in 1935. Just as the US under FDR created an "Exchange Stabilization Fund" with the gains from revaluing gold in the 1930s, and demanded all US citizens deposit gold with the central bank, Germany, Britain, France, Australia and other countries did the same thing when they revalued or went off the gold standard.
While the gold standard isn't the whole story of the Depression, the impact of the ever-tigther noose of the need for gold on countries such as Germany, Belgium, Sweden, and Britain was significant. Though he may somewhat overstate his case, Eichengreen has done amazing work in bringing it out.
Eichengreen's book begins by showing the deep roots of the Great Depression in World War I. Although many contemporaries attributed the Depression to "misalignments" from the war, Eichengreen actually shows how this happened. First, expansions of political representation and the rise of proportionality of elections during the war, along with the increased presence of the government in everyday life, brought many issues like taxes and wage distribution and unemployment to the forefront of political consciousness, and made every issue potentially debatable. Central banks became important parts of this debate, and therefore could not operate as mere independent managers of money. Financiers lost trust that central banks could always stabilize the gold standard, and this lead to more destabilizing attacks on the currency, both when some currencies were inflating in the 1920s and when they were deflating later. The bad blood from the war also meant central banks did not negotiate with each other to stabilize inflows and outflows like they once did.
Eichengreen provides ample evidence that these changes made the gold standard dangerous where previously it had been stabilizing. France, particularly, with the restrictions on the Banque de France imposed after their extreme inflation (itself caused by political disagreements), kept tightening money supplies from 1929 to 1936, drawing gold from the rest of the world. They did not listen to other pleas to loosen or to lend to countries in distress, partially because they worried about sacrificing tariffs and German reparations in negotiations. France's tightening in turn caused Britain, Belgium, Sweden and others to tighten to defend their currencies, and this consistently shrunk output and lowered employment. It was a vicious cycle, only ending when the countries got off gold and eventually expanded their money supply.
The only problem with the book is that Eichengreen's evidence is weakest where it needs to be strongest, especially in regards to America. For instance, in blaming the lack of gold for the U.S. Federal Reserve's decision to deflate in 1920, thus bringing on the severe early 1920s recession, he provides no numbers indicating the US was lacking in gold and only years old quotes to show it was a concern. Similarly, after Britain left the Gold Standard in September 1931, Eichengreen claims the United States had to deflate to protect its gold stock. Yet he ignores how easy it was for the U.S. to inflate using purchases of bankers acceptances or discounting trade bills that wouldn't reduce gold, and again his quotes showing concern with gold are out-of-date. In other words, in the cases where monetary policy was most important, and where the U.S. Fed dominated international money supply, the Friedman and Schwartz story stands. The Fed (and, for different reasons, the Banque de France) screwed up not because they were low on gold, but because they misunderstood the consequences of their actions. They and the rest of the world suffered those consequences.
But besides its main argument, the book is just a magisterial summary of all the fiscal and monetary actions taken by all the major economies between World War One and the mid-1930s. For anyone who focuses on the United States, the revelations of extremely similar practices at similar times here is eye-opening. Just as the Herbert Hoover created the Federal Farm Board in 1929 to buy up agricultural surpluses and protect farmers' incomes, Brazil created a "Coffee Institute" in 1927, and France created a National Wheat Office in 1935. Just as the US under FDR created an "Exchange Stabilization Fund" with the gains from revaluing gold in the 1930s, and demanded all US citizens deposit gold with the central bank, Germany, Britain, France, Australia and other countries did the same thing when they revalued or went off the gold standard.
While the gold standard isn't the whole story of the Depression, the impact of the ever-tigther noose of the need for gold on countries such as Germany, Belgium, Sweden, and Britain was significant. Though he may somewhat overstate his case, Eichengreen has done amazing work in bringing it out.
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June 24, 2023Among lay readers, I think there’s a general sense that Milton Friedman and Anna Schwartz authored the definitive work on the role of the Federal Reserve through the Great Depression with A Monetary History of the United States, 1867–1960. Professor Eichengreen added to my understanding, detailing the deleterious effects of the gold standard across all major economies. Golden Fetters is dense; I reread many passages attempting to digest completely this author’s work. Even with malabsorption, I felt Golden Fetters significant, however. The principal factors aswirl in this analysis included international indebtedness, particularly reparations, wage and price changes, war-induced trade imbalances, central bank gold and foreign exchange reserves, politics, liquidity, policy coordination, and investor confidence. Because the gold standard alone restricted most major policy options across borders, Professor Eichengreen contends this is an understudied, if not unstudied, contributor to the economic downturn of the 1930s.
The severity of the Great Depression seems far from our minds today. That era was a wholly different environment from what we have experienced in my lifetime. American nominal Gross Domestic Product fell by 45% from its peak in 1929 to the 1933 trough. In that same time period, consumer prices fell 25%. Had the Second Bank of the United States survived, perhaps America would have come to master the art of central banking long before the First World War and the economic volatility of these years would have been much reduced, if not eliminated. My impression of history, though, is that from its founding in 1913 until at least the Second World War, the Federal Reserve operated with an incomplete understanding of its full potential and that in aggregate it rendered more harm than good. Father, forgive them; for they know not what they do? Keeping with the religious theme, this history puts those famous words from 9 July 1896 into a completely different light, "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." William Jennings Bryan never lived to know how right he was and for reasons he would never be able to comprehend.
Today, central banks appear to have adopted a coordinated system of unlimited liquidity in moments of crisis through bilateral swaps where systemic institutional guarantees are also issued upon evidence of imperiled investor confidence. The Federal Reserve stands behind this system where risk has been socialized in large measure during moments of distress. None of this would be possible under a gold standard, which makes me wonder why there is so much chatter about a return to gold, or, even worse, chatter for cryptocurrency. Shackling national economic policies to arbitrary pegs can make for notably bad outcomes, as Professor Eichengreen recounts. I wonder about the occasional nostalgia for such a discredited, archaic arrangement.
The severity of the Great Depression seems far from our minds today. That era was a wholly different environment from what we have experienced in my lifetime. American nominal Gross Domestic Product fell by 45% from its peak in 1929 to the 1933 trough. In that same time period, consumer prices fell 25%. Had the Second Bank of the United States survived, perhaps America would have come to master the art of central banking long before the First World War and the economic volatility of these years would have been much reduced, if not eliminated. My impression of history, though, is that from its founding in 1913 until at least the Second World War, the Federal Reserve operated with an incomplete understanding of its full potential and that in aggregate it rendered more harm than good. Father, forgive them; for they know not what they do? Keeping with the religious theme, this history puts those famous words from 9 July 1896 into a completely different light, "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." William Jennings Bryan never lived to know how right he was and for reasons he would never be able to comprehend.
Today, central banks appear to have adopted a coordinated system of unlimited liquidity in moments of crisis through bilateral swaps where systemic institutional guarantees are also issued upon evidence of imperiled investor confidence. The Federal Reserve stands behind this system where risk has been socialized in large measure during moments of distress. None of this would be possible under a gold standard, which makes me wonder why there is so much chatter about a return to gold, or, even worse, chatter for cryptocurrency. Shackling national economic policies to arbitrary pegs can make for notably bad outcomes, as Professor Eichengreen recounts. I wonder about the occasional nostalgia for such a discredited, archaic arrangement.
June 14, 2020
In Golden Fetters, Barry Eichengreen effectively presents his argument that the Gold Standard is the key to understanding the Great Depression.
The gold standard of the 1920s ushered in the Depression of the 1930s by intensifying the fragility of international financial system. It was the mechanism transmitting the destabilization from the USA to the rest of the world. It was preventing policymakers from averting the failures of banks and restraining the spread of financial panic.
Indeed, the gold standard also existed in the 19th century without such tragic effects, but WWI disintegrated the political and economic foundations of the prewar gold standard system. Credibility and cooperation declined; in domestic politics, disputes over income distribution became increasingly aggressive.
Barry Eichengreen’s book successfully fits in all aspects of the post-war events into a coherent portrait of economic policy and performance. The author shows how the policies pursued, together with economic imbalances created by WWI, gave rise to the Great Depression. He effectively proves his main argument that the gold standard by nature constrained economic policies and was responsible for the unstable economic environment.
I give Golden Fetters 4 stars because of Eichengreen’s style, which – honestly – I didn’t like at all. Nevertheless, his work is an impressively well researched study of the gold standard as a central factor in the worldwide Depression. Recommendable.
The gold standard of the 1920s ushered in the Depression of the 1930s by intensifying the fragility of international financial system. It was the mechanism transmitting the destabilization from the USA to the rest of the world. It was preventing policymakers from averting the failures of banks and restraining the spread of financial panic.
Indeed, the gold standard also existed in the 19th century without such tragic effects, but WWI disintegrated the political and economic foundations of the prewar gold standard system. Credibility and cooperation declined; in domestic politics, disputes over income distribution became increasingly aggressive.
Barry Eichengreen’s book successfully fits in all aspects of the post-war events into a coherent portrait of economic policy and performance. The author shows how the policies pursued, together with economic imbalances created by WWI, gave rise to the Great Depression. He effectively proves his main argument that the gold standard by nature constrained economic policies and was responsible for the unstable economic environment.
I give Golden Fetters 4 stars because of Eichengreen’s style, which – honestly – I didn’t like at all. Nevertheless, his work is an impressively well researched study of the gold standard as a central factor in the worldwide Depression. Recommendable.
November 9, 2017
I greatly dislike his writing style, but the book is interesting ( gold content if I may say)
April 10, 2011
This book is an economic history of the Gold Standard, as it was reconstituted and operated after World War I until its demise in the midst of the Great Depression. It is a difficult slog, but worth the effort if one is interested in understanding how the gold standard worked and how its difficulties contributed to the Great Depression. Be prepared to take notes or at least go back and recheck past sections Some of the takeaways from this book include: 1) a discussion of why the system worked at all and what was necessary for it to work; 2) an explanation of how the postWWI reintroduction of the system was flawed -- role of the US and France; increased political participation of labor and others who traditionally bore the costs of gold-based retrenchment policies, which meant that policy makers could not apportion losses is such as way as to avoid trouble; 3) a discussion of the importance of national policies and how the Gold Standard never was as automatic as it was claimed to be by its advocates. The book is also highly relevant to current issues once one understands the workings of analogous relationships that might cause run behaviors -- see Krugman's book on depression economics. A very rich history book, but one that requires attention.
September 6, 2018
Important to combat the Gold Bugs
Not really for the lay economist. However it does contain important information for arguing with libertarian gold bugs. A condensed version of this book would be handy.
Not really for the lay economist. However it does contain important information for arguing with libertarian gold bugs. A condensed version of this book would be handy.
March 16, 2024
I gave it 5 stars because it's about the Great Depression, and it's a topic that interest me. Eichengreen is a good writer and this has a unique perspective with regards to impact of gold standard. That said, if you're not really into the topic their might be other books that are lighter and easier introduction.
August 28, 2022
Very interesting analysis of the contribution of the gold standard to the depression. It can seem a lengthy read, with an abundance of detail, but the author very convincingly makes the case that the gold standard contributed to depth and duration of the Great Depression.
December 27, 2023
This is NOT an easy read, but well worth the effort. At least some knowledge of macroeconomics is a must.
March 27, 2025
Plot twist: the french started the great depression.
April 2, 2015
I grad with a BS in Economics in 1985, a good while ago. This book had some fairly complex economic financial analysis. It was a difficult read, but a good refresher for some concepts that I've not studied in a while. His analysis on the GD was deeply analytical, week backed with statistics, and not at all US centric. Deepened my understanding considerably. The GD did not begin with the '29 crash at all, certainly not as a global phenomenon. The GD really began with the unravelling of the community of nations and international cooperation. WWI and reparations, but also increased democratization and social pressures made it difficult for governments to effectively address economic crisis's.
If you care about the history of the GD, and international finance this book will enlighten you.
If you care about the history of the GD, and international finance this book will enlighten you.
November 3, 2008
Interesting historically but fairly dry and in no way engaging. I would write more if I cared more about this book.
September 5, 2010
This book contains some good data but the author does not connect the dots.
August 7, 2011
An awesome review of the history of the gold standard, and a very compelling argument about why it used to work but how modern pressures have made keeping the standard untenable.
May 19, 2012
In honor of Ron Paul. mwahahaha
Displaying 1 - 15 of 15 reviews