1. Discussion of “The French Gold Stock and the Great Deflation” James D. Hamilton University of California, San Diego

2. Consider an economy with a single produced good (potatoes) aggregate price level = P dollars per potato relative price of gold = R potatoes per ounce of gold dollars per ounce of gold =

3. Gold standard: dollars per ounce of gold (PR) is fixed If relative price of gold (R) goes up, price level (P) must fall

6. Monthly wholesale prices 1923-1926

7. Hyperinflations in Germany, Austria, Poland, Russia, Hungary

9. 1931: European financial distress Failure of Austria’s Credit-Anstalt Bank runs in Hungary, Czechoslovakia, Romania, Poland, Germany Depositors outside Berlin bank, 1931

12. Source: Hamilton (1988) Private discount rates in Belgium, Switzerland, and France

13. Source: Hamilton (1988) Yields on short-term U.S. Treasury securities

14. Can gold standard restore confidence out of chaos? If government not trustworthy without a gold standard, do you trust it to follow a gold standard? Britain-- no France and U.S.-- yes, but at a cost

15. Source: Bernanke and James (1991)