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Interest Rates While On The Gold Standard

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Jeremiah Dyke posted on Sun, Jul 12 2009 1:14 PM

What is the difference between a Fed raising interest rates while on a gold standard or off?


The question came to mind while I was reading Global Capitalism,  which stated that "In 1931 The Fed responded to the financial crises in classic gold standard fashion, raising interest rates from 1.5 to 3.5 percent in a week to keep money in the U.S. and in the banks"

Read until you have something to write...Write until you have nothing to write...when you have nothing to write, until you have something to write...Jeremiah 

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I assume you mean:  What's the difference in the ability of the FED of raising interest rate between 1931 and now?

Because in 1931, the US wasn't really on the classical gold standard anymore, even though gold coins were circulating.

In this respect, there's not much difference in the FED's ability to raise interest rate between 1931 and now, although at that time, it would typically increase the reserve requirements while now, the FED does mainly uses the open market operations and discount window.

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