Ah, the fall from grace.

I like Selgin. (#1419510) At least his early work, and a lot of the stuff on the mechanics of banking + price level. (Less Than Zero is a great succint summary of Jeff Booth's thesis like a decade before Bitcoin existed and 25 years before Booth wrote The Price of Tomorrow)

Since he started sucking up to the money rulers covering monetary policy for Cato, he got... captured? I guess is a nice word for it. And while False Dawn is eyeing me from the desk, I'm not exactly excited about it. Why?

The Great Depression debates are were all economists and historians and their ideological frameworks go to die.The Great Depression debates are were all economists and historians and their ideological frameworks go to die.

Nothing is very clear, everything upside down, nothing straightens out neatly. You can make absolutely any argument and a century later we're still butting our heads over it. (#1421984) Too much data and records to have a few major interpretations, too much ideologies and political partisanship over this or that president, this or that monetary regime.

I personally just take Robert Higgs (and partly Rothbard’s) accounts at face value – trust, don’t verify – and then, as it were, move on to other things.

Today Mr. Selgin was presenting before the one academic seminar I attend with some regularity – a bro fest of big-name economic historians organized by CEPR and The Graduate Institute of Geneva (Mises' old playing grounds, btw). It started in 'rona and had weekly/biweekly presentations, and has since morphed into the go-to academic event (perhaps together with Brunnermeier's Markus Academyat Princeton, where Lyn Alden has presented btw) for people like me.

False Dawn, in Selgin's telling, is trying to answer how the US managed to recover from the Great Depression, and what role the New Deal policies played. He claims to be pretty fair, and his novel advancement is to extract New Deal policies from other contemporanous events.

There's much for every camp to dislike: neither fiscal nor monetary did very much during the 1930s, much to the chagrin both to Keynesian/Big gov stimulus peeps and Milton Friendman-esque monetarists.

Here's a rather interesting graph that Selgin traces the history of:

Notice that the “Fed was not actively adding to its balance sheet… or buying securities in the open market.” All those gold increases are from something else: What IS happening is that warmongering in Europe (Hitler story), gold shipped in from Europe (Fed doesn’t get it; Treasury takes it and Fed gets gold certificates – the ones that are still on its BS today, btw). ANOTHER factor driving gold inflow; “Stalin is subsidizing the Siberian mines in a big way… resulting in a tremendous increase in their output”

“the main driver of the little monetary expansion that does take place” is the DEVALUATION of dollar; not responsible for the ongoing and consistent increase.

By 1938, the New Deal policies (NRA, production restrictions, cartels, AAA) are over, ruled unconstitutional or downsized. Yet the Depression raged on.

One usual explanation is that we needed big government stimulus via WWII before we could get out of the Keynesian demand-slump that was the GD... Nonsense, says Selgin thankfully, and points to something else:

Why so little investment before? The business community was VERY, VERY uncertain throughout the 1930s. Regime uncertainty – he explicitly said those words, and I noted the neat little hat-tip to Higgs there – erratic and aggressive anti-business among Roosevelt's admin.

During the war, the socialist managers of government planning worked WITH business and factories to crank out machinery, which changed the govts attitude toward business.

The New Dealers decide that they need business community to build the war machines, “relying on capitalism as it were.” FROM hostile to cozy relationship, meaning the animal spirits smiling again.

Not that impressive:
One of the best things the Roosevelt admin did and which “set the stage for recovery,” said Selgin, was closing the banks. “There was no way you’d get recovery going unless you solved the bank problem” + took off gold fetters.

So much for Selgin's long career in monetary regimes and banking. (Golden Fetters is Eichengreen's book title/explanation for why the GD happened and lasted so long)

People tend to credit deposit insurance as the successful reopening of the banks… the really important fact that allowed so many banks to be reopened was simply the fact that people couldn’t withdraw gold anymore.

Yep, he actually said that. Straight up.

The banking crises were a run on the dollar moreso than the banks, which he claimed were mostly solved. Once the cut dollar-gold bond, most of the reason for the run went away.

So yeah, not sure what to make of this. Just another GD book to pile onto the others, I guess?

The best thing we got during the seminar today was a question about why the New Deal myth persists so deeply and has for so long... Selgin said that it was because nobody has really looked at what the policies actually did and unravel their impact fairly, plus (and I believe this bit), there's an AWFUL LOT of stupid partisanship where people don't want their favorite president criticized.

Beautiful.

I'll report back, Siggy, when I've actually read the book.