In arguing for the gold standard and against Matt O’Brien, James Rickards claims “The reason we didn’t [have a swift recovery] in 1929 is policy uncertainty and Roosevelt changing his mind,” to which O’Brien rightly points out that Roosevelt was not President in 1929, and that as soon as he took office, recovery began. Rickards’s reply is, “Roosevelt did nothing to get us out of the Great Depression.”
Now, it is obviously false that Roosevelt-inspired uncertainty had anything to do with the decline from 1929 onward, though perhaps that’s just Rickards making a mistake. The further claim betrays an underlying animus toward Roosevelt, informed by false beliefs about the Great Depression, and supports my off-the-cuff thought about gold-standard advocacy here.
Asking why there was a slow recovery after Roosevelt took office is like Newton asking why apples, once detached from the tree, fly off into space. There was no slow recovery after Roosevelt took office. The recovery after Roosevelt took office was rapid: it was “the greatest expansion in output and industrial production in any four year period in U.S. history outside of wartime.”
Rickards laments that the stock market didn’t return to where it was in 1929 until 1954 (the more usual complaint is that unemployment did not return to its 1929 level until the early 1940s). Let’s not debate what year recovery was complete, or what index should tell us when recovery was complete: let’s just stipulate that it took a long time to recover from the Great Depression. Here’s a simple concept: something can be going very fast and in the right direction and still take a long time to get to its destination. The Saturn V rockets were very fast – the most powerful launch vehicles ever built. They still took a while to get to the moon because the moon is far away. The New Deal recovery was the Saturn V of economic recoveries. Rapid, headed in the right direction, but took a while to get there because it had a long way to go.
Whether Rickards is ignorant of this recovery or engaging in deception to avoid acknowledging it, I don’t know. The American voters knew about the speed of economic growth, of course; they returned Roosevelt to office in a record landslide in large measure because they had experienced this recovery.
When Rickards says, “Roosevelt did nothing to get us out of the Great Depression,” he is wrong.
Now might be a good time to invoke Daniel Davies’s dictum, “Good ideas do not need lots of lies told about them in order to gain public acceptance”. Though Rickards may not be per se lying he is saying things that aren’t true and making an inconsistent argument. It is not clear why Rickards really wants the gold standard. Against O’Brien’s pointing out that the gold standard constrains policymakers to procyclical actions during recessions, Rickards says that any given implementation of a gold standard can have lots of discretion. Later he says that the point of a gold standard is to constrain policymakers’ discretion. He also says deflation is good for debtors, which is not something economists generally believe.
If gold standard advocates can do no better than this, the GOP and the press should not be asking us to take them seriously.