Re: Long Depression: 1873 - ???

Knight_of_BAAWA — Sat, 17 Jan 2009 21:15:40 GMT

Only for the east-coast banking establishment.

Re: Long Depression: 1873 - ???

Ancien Regime — Sat, 17 Jan 2009 21:14:58 GMT

no?

Sadly, Keynesian "economic thought" dominates academia so "higher prices = higher prosperity".

Long Depression: 1873 - ???

MatthewWilliam — Sat, 17 Jan 2009 20:35:10 GMT

I posted this in another thread but it got no attention.

I was looking into the effects of the Long Depression. After reading the relevant part in Rothbard's History of Money and Banking in the USA I am in doubt as to whether or not there was a depression. The data on the wikipedia page shows positive GNP growth every dacade (in Europe) from 1870 to 1900. The discussion page for the article says:

It seems to me this article has some contradictory information and doesn't really explain clearly any consensus of what the "Long Depression" actually was, whether it was a Depression at all, and what its effects were. Could someone with knowledge of the economies of this time period possibly clarify and clean up this article?

From Rothbard's book, p.154-155

Orthodox economic historians have long complained about

the “great depression” that is supposed to have struck the

United States in the panic of 1873 and lasted for an unprecedented

six years, until 1879. Much of this stagnation is supposed

to have been caused by a monetary contraction leading to

the resumption of specie payments in 1879. Yet what sort of

“depression” is it which saw an extraordinarily large expansion

of industry, of railroads, of physical output, of net national

product, or real per capita income? As Friedman and Schwartz

admit, the decade from 1869 to 1879 saw a 3-percent-perannum

increase in money national product, an outstanding

real national product growth of 6.8 percent per year in this

period, and a phenomenal rise of 4.5 percent per year in real

product per capita. Even the alleged “monetary contraction”

never took place, the money supply increasing by 2.7 percent

per year in this period. From 1873 through 1878, before

another spurt of monetary expansion, the total supply of bank

money rose from $1.964 billion to $2.221 billion—a rise of 13.1

percent or 2.6 percent per year. In short, a modest but definite

rise, and scarcely a contraction.

It should be clear, then, that the “great depression” of the 1870s

is merely a myth—a myth brought about by misinterpretation of

the fact that prices in general fell sharply during the entire

period. Indeed they fell from the end of the Civil War until 1879.

Friedman and Schwartz estimated that prices in general fell

from 1869 to 1879 by 3.8 percent per annum. Unfortunately,

most historians and economists are conditioned to believe that

steadily and sharply falling prices

must

result in depression:

hence their amazement at the obvious prosperity and economic

growth during this era. For they have overlooked the fact that

in the natural course of events, when government and the banking

system do not increase the money supply very rapidly, freemarket

capitalism will result in an increase of production and

economic growth so great as to swamp the increase of money

supply. Prices will fall, and the consequences will be not depression

or stagnation, but prosperity (since costs are falling, too)

economic growth, and the spread of the increased living standard

to all the consumers.

So was there a depression in the USA or not??

Economics Questions

Re: Long Depression: 1873 - ???

Re: Long Depression: 1873 - ???

Long Depression: 1873 - ???