What caused the Great Depression?



The following excerpt is from a paper on macroeconomics by Emi Nakamura and Jon Steinsson, Columbia University October 25, 2017:

''throughout the period between early 1930 and March 1933, the Fed failed to act and instead allowed the money supply to fall by large amounts and allowed a substantial fraction of the banking system to fail. Eichengreen (1992) argues that an important reason why the Fed did not act was that it felt constrained by the gold standard. The idea is that effective action almost surely would have been inconsistent with remaining on the gold standard and those that favored remaining on the gold standard prevailed until Roosevelt took office. One of President Roosevelt’s first policy actions was to take the US off the gold standard in April 1933. Industrial production immediately sky-rocketed. The weakness of this observation is that the Roosevelt administration, of course, changed a number of polices.''

Greece's economy is going through a deep recession the last 7+ years. The government is not allowed to decide on a sovereign monetary policy because of EU obligations but if Greece had not joined the euro, how would the country's public debt evolve compared to its enormous size inside the euro? Are there any economic studies depicting this hypothesis? The depreciation of the dollar back in 1930 allowed exports to bring growth back to the economy. If Greece had remained strong with its national currency, how would the current bleak key economic indicators look nowadays? Heretic as it may sound, we should compare the sustainability of Greece remaining in the euro versus printing its own national currency again (without leaving EU) if we want to have a honest and rational scientific dialogue in the public sphere of political un-reasoning concerning the future of Greece's economy and society (brain drain and irreversible demographic problems).

-Stathis Kassios

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