Golden Fetters

Golden Fetters is the book the Austrian case on the interwar gold standard has to answer. The text itself is not here; the argument is, in its author’s words — because the Austrian economist who quotes it thought it worth stating fully before disputing it.

The Argument

Eichengreen published Golden Fetters: The Gold Standard and the Great Depression, 1919–1939 in 1992. Its claim runs in four moves, as he summarises them: the 1920s gold standard set the stage for the 1930s by making the international financial system fragile; it was the mechanism transmitting the destabilising impulse outward from the United States; it magnified the initial shock; and it was the principal obstacle to the offsetting action that might have arrested the collapse. From that follows the observation most often cited from the book — that countries began to recover roughly in the order they left gold.

The quotation itself, with its attribution, appears in The Gold Standard.

Why It Is Here

Salerno names it as one of two recent books elaborating the arguments against the gold standard — the Keynesian case, set beside the monetarist one — and quotes Eichengreen’s summary at length in Money, Sound and Unsound before answering it.

The Austrian answer does not dispute that the interwar arrangement failed. It disputes what failed: on that reading the gold-exchange standard of the 1920s was already a compromise that let central banks pyramid credit on foreign-exchange reserves, so the collapse indicts the compromise rather than the metal. What Eichengreen calls a fetter is, in this tradition, the constraint whose absence caused the boom.

See Also

• Barry Eichengreen - the author, and the route by which he is cited here
• The Gold Standard - where the thesis is quoted and answered
• Money, Sound and Unsound - Salerno’s volume, the source of the quotation
• Joseph T. Salerno - the economist who states the thesis before rebutting it
• Money and Banking

Sources

• Money, Sound and Unsound - Salerno quoting Eichengreen’s own summary of the book’s argument