bailey_187
25th July 2010, 12:17
So i was reading Robert Brenner's The Boom and the Bubble, and he was saying how the expansion of Japanese and Western European (mostly German) goods into the world markets in the late 60s caused a depression of prices, which cut into US capitalists profits, and the USA began to run a balance of payments deficit.
He then says how the USA government responded, which is what i dont get. I understand why it pressured the world to move from a pegged/fixed exchange rate system to a floating exchange rate system.
However, why did it leave the gold standard in response ot the above crisis? I know the problem of the gold standard in other areas, but in theory, for the problem the USA was facing, the Gold Standard shoul of sorted it out.
Because Germany and Japan, with their trade surpluses would have seen an inflow of gold, neeed it to expand the domestic money supply, causing interest rates to fall and prices and wages to rise, raising demand for import and harming prospects for exporters, leading it to balance out. At the same time, the USA with a defecit would suffer an outflow of gold, producing a decrease in its money supply, a fall in wages and prices and decreased demand for imports. So surely, in theory, the gold standard would have fixed the problem?
Why didnt it? What good did getting rid of it do, it regards to the problems the USA faced in the early 1970s?
or am i understanding the gold standard self-regulating thing wrong?
He then says how the USA government responded, which is what i dont get. I understand why it pressured the world to move from a pegged/fixed exchange rate system to a floating exchange rate system.
However, why did it leave the gold standard in response ot the above crisis? I know the problem of the gold standard in other areas, but in theory, for the problem the USA was facing, the Gold Standard shoul of sorted it out.
Because Germany and Japan, with their trade surpluses would have seen an inflow of gold, neeed it to expand the domestic money supply, causing interest rates to fall and prices and wages to rise, raising demand for import and harming prospects for exporters, leading it to balance out. At the same time, the USA with a defecit would suffer an outflow of gold, producing a decrease in its money supply, a fall in wages and prices and decreased demand for imports. So surely, in theory, the gold standard would have fixed the problem?
Why didnt it? What good did getting rid of it do, it regards to the problems the USA faced in the early 1970s?
or am i understanding the gold standard self-regulating thing wrong?