the industrial decline began before monetary contraction or banking panics – the conventional culprits – took hold. But Hoover and the federal government Just would not be enough back then do play some sort of cartel ringmaster to keep wages up in manufacturing industry for several more years. But the question he asks is yet to be answered about the sector divergences in hours worked and the rapid decline in hours worked in manufacturing industry well before any monetary contraction had a chance to take effect.
A few days ago I had the opportunity to comment on an old VoxEu piece by Ohanian. Now he´s made a presentation at the Hoover Fed Conference – Monetary Policy in the Midst of Big Shocks – that is dismaying in its conclusions. From the abstract:
This paper studies the impact of the largest deviations from price stability during the Fed´s first 100 years, with a focus on understanding the Fed´s role in impacting the economy during the post-World War I period, the Great Depression, World War II, and the Staglfation of the 1970s. I find that deflation was very depressing in the 1930s, but because of cartel and wage setting policies, and that there is no presumption that deflation is as destructive as commonly believed. In particular, the similar deflation in the early 1920s did not depress the economy nearly as much as in the 1930s. I find…
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