What they thought in 1932

Smiling Dave — Sun, 26 Jun 2011 20:45:41 GMT

...on July 5, 1932, The Times of
London published a letter to the editor signed by 41 prominent economics
professors across the UK, including Keynes. The letter blamed “the great
fall in wholesale prices” since 1930 for the most serious evil of the
economic crisis.

Although some prices can adjust downward as well as
upward in response to supply and demand changes, it was claimed, other
prices were “relatively inflexible,” thereby creating “serious
maladjustments throughout the economic system.” Those prices that are
adjustable, then, need to be raised to where they were before the crisis began.

This could be done by private spending, monetary easing, tax
rebates, and public investment...

Under the heading “Fresh Money for
Spending,” the letter exhorted private individuals and institutions to
assist “by spending money according to their capacity.” The sentence
following this passage is explicit about how presumptions about capacity
to spend should be set: “In cases of doubt, the patriotic motive should
weigh on the side of expenditures rather than economy.” Finally, the
government should alleviate the sense of uncertainty that was provoking
public fears of inflation by declaring its commitment to this new policy in
advance, and not use re-inflation as an excuse to engage in competitive
devaluation of the pound, which would worsen the world situation.

History

What they thought in 1932