Return to the Gold Standard


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"95% of America's problems disappear if we were to Abolish the Federal Reserve." 
~ Aaron Russo (thank you Aaron, R.I.P.) 

Watch Aaron Russo's documentary: 
"America : Freedom to Fascism"

The Money Masters documentary: 
Exposing the Illegal and Unconstitutional Federal Reserve FRAUD!

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Return to the Gold Standard

What is "the Gold Standard"?

The gold standard is a monetary standard under which the basic unit of currency is defined by a specific quantity (weight) of gold. The United States once had a "gold standard" that our monetary system was based upon.  A "pure" gold standard was used by most modern countries between the years 1879 and 1914.  Under the gold standard, the participating countries' currencies were "convertible" based on its gold value. For example, if the currency for country A was equal to 100 grains of gold, and the currency for country Z was equal to 50 grains of gold, then 1 A was equal to 2 Z.  In 1971, President Richard Nixon removed the tie between the dollar and gold thereby ending the predominance of gold in the international monetary system.

Return to the Gold Standard

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"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."
~ President Woodrow Wilson, immediately after signing the Federal Reserve into existence.

"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." 
~ Abraham Lincoln

"I sincerely believe ... that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." 
~ Thomas Jefferson

"a legitimate government can both spend and lend money into circulation...,when your bankers here in England place money in circulation, there is always a debt principal to be returned and usury to be paid. The result is that you have always too little credit in circulation to give the workers full employment. You do not have too many workers, you have too little money in circulation, and that which circulates, all bears the endless burden of un-payable debt and usury." 
~ Benjamin Franklin (printer of Colonial Scrip)

Support the "Monetary Reform Act" that will Abolish the Federal Reserve 
and the "Sovereignty Movement" by the States

(The Sovereignty Movement is gaining rapid momentum in about 24 states - whose legislatures 
are introducing and enacting new laws to restrict the un-constitutional actions of the Federal government)

The Monetary Reform Act, will ABOLISH the Federal Reserve, and is absolutely required if we truly want peace, prosperity and liberty.  The Monetary Reform Act will pay off our nation's debt massive $16 Trillion debt in LESS than 24 months and simultaneously:

*  Repeals and Abolishes the Federal Reserve Act of 1913 and National Banking Act of 1864 which restores America's banking system to that which we had under Pres Abraham Lincoln.

*  Returns America's banking system, to AMERICA!

*  America's own banking system then begins issuing our own "debt-free U.S. Notes" (which is what our Constitution REQUIRES)

*  Abolishes "Fractional Reserve Banking"

*  Immediately prevents the U.S. Government from any membership or involvement with the: IMF, BIS and World Bank

Did you know that Fractional Reserve Banking - which we now have under the ILLEGAL/UNCONSTITUTIONAL Federal Reserve is responsible for 90% of all inflation?

Did you know that the 5 islands of Guernsey, just off of Normandy, France's coast, has been operating WITHOUT an illegal/fraudulent banking system, by issuing their own debt-free paper currency since 1815?

Was President John Kennedy assassinated for his signing Executive Order 11110 - 
which essentially put the privately-owned Federal Reserve, out of business?

The Money Masters is a MUST WATCH 3 ½ hour long movie & exposé 
as to why America Need to Abolish the Federal Reserve.

The Money Masters movie can be downloaded here:


Abolish the Federal Reserve

Abolish The Federal Reserve

The Federal Reserve is the Biggest Fraud Ever Perpetrated 
Against America and Americans

The Abolish the Federal Reserve Act, H.R. 833
as Introduced in the U.S. House of Representatives by Dr. Ron Paul

Before the US House of Representatives, February 4, 2009, introducing the The Federal Reserve Board Abolition Act, H.R. 833.

Madame Speaker, I rise to introduce legislation to restore financial stability to America's economy by abolishing the Federal Reserve. Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people.

From the Great Depression, to the stagflation of the seventies, to the current economic crisis caused by the housing bubble, every economic downturn suffered by this country over the past century can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial "boom" followed by a recession or depression when the Fed-created bubble bursts.

With a stable currency, American exporters will no longer be held hostage to an erratic monetary policy. Stabilizing the currency will also give Americans new incentives to save as they will no longer have to fear inflation eroding their savings. Those members concerned about increasing America's exports or the low rate of savings should be enthusiastic supporters of this legislation.

Though the Federal Reserve policy harms the average American, it benefits those in a position to take advantage of the cycles in monetary policy. The main beneficiaries are those who receive access to artificially inflated money and/or credit before the inflationary effects of the policy impact the entire economy. Federal Reserve policies also benefit big spending politicians who use the inflated currency created by the Fed to hide the true costs of the welfare-warfare state. It is time for Congress to put the interests of the American people ahead of special interests and their own appetite for big government.

Abolishing the Federal Reserve will allow Congress to reassert its constitutional authority over monetary policy. The United States Constitution grants to Congress the authority to coin money and regulate the value of the currency. The Constitution does not give Congress the authority to delegate control over monetary policy to a central bank. Furthermore, the Constitution certainly does not empower the federal government to erode the American standard of living via an inflationary monetary policy.

In fact, Congress' constitutional mandate regarding monetary policy should only permit currency backed by stable commodities such as silver and gold to be used as legal tender. Therefore, abolishing the Federal Reserve and returning to a constitutional system will enable America to return to the type of monetary system envisioned by our nation's founders: one where the value of money is consistent because it is tied to a commodity such as gold. Such a monetary system is the basis of a true free-market economy.

In conclusion, Mr. Speaker, I urge my colleagues to stand up for working Americans by putting an end to the manipulation of the money supply which erodes Americans' standard of living, enlarges big government, and enriches well-connected elites, by cosponsoring my legislation to abolish the Federal Reserve.


Question:  Why wasn't Dr. Paul's Federal Reserve Board Abolition Act (above) UNANIMOUSLY Passed by ALL in the House, Senate and signed into Law by the President????

The Federal Reserve is the Biggest Fraud ever perpetrated on Americans
The Federal Reserve "owns" America, the economy and every person.
You will never know freedom, liberty, prosperity or justice, until 
the Federal Reserve is Abolished!



There will NEVER be "peace, prosperity and liberty" as long as 
international bankers and foreigners "own" America, Americans 
and America's Un-constitutional Federal Reserve. 

The Federal Reserve, a PRIVATE Corporation, "owned" 
NOT by the U.S. Government, but the International Bankers, 
(Rockefeller's, Rothschild's, etc.) 
Prints "Worthless" Paper - Abolish the Federal Reserve!


Abolish The Federal Reserve

You may not have heard much about it, but there’s a rapidly growing movement sweeping most of the 50 state's governments and legislatures to fight back against "federal tyranny" that will reassert each state's own "sovereignty" and stop the uncontrolled expansion of federal government power. 

Already, nearly half of the state legislatures are currently considering or having their elected representatives prepare to introduce resolutions to reassert the principles of the 9th and 10th Amendments and the idea that federal power is strictly limited to specific areas detailed in the Constitution and that all other governmental authority rests with the states.

In the version of this bill being considered in Washington state, they appeal to the authority of James Madison in The Federalist who wrote:

”The powers delegated to the federal government are few and defined. Those which are to remain in the state governments are numerous and indefinite. The former will be exercised principally on external objects, [such] as war, peace, negotiation, and foreign commerce. The powers reserved to the several states will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people.”

The Founders believed in a balance between state and federal power. The state sovereignty movement clearly arises from the belief that the balance of power has tilted too far and for too long in the direction of the federal government and that it’s time to restore that lose balance.


"The bank hath benefit of interest on all moneys which it creates out of nothing." 
~ William Paterson, founder of the Bank of England in 1694, then a privately owned bank.

"Let me issue and control a nation's money and I care not who writes the laws." 
~ Mayer Amschel Rothschild (1744 - 1812) and founder of the House of Rothschild.

"The few who understand the system will either be so interested in its profits or be so dependent upon its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." 
~ The Rothschild brothers of London writing to associates in New York, 1863. 

"Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better world to live in. But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits." 
~ Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain

"I am afraid the ordinary citizen will not like to be told that the banks can and do create money. And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hand the destiny of the people." 
~ Reginald McKenna, as Chairman of the Midland Bank, addressing stockholders in 1924

"The banks do create money. They have been doing it for a long time, but they didn't realise it, and they did not admit it. Very few did. You will find it in all sorts of documents, financial textbooks, etc. But in the intervening years, and we must be perfectly frank about these things, there has been a development of thought, until today I doubt very much whether you would get many prominent bankers to attempt to deny that banks create it." 
~ H W White, Chairman of the Associated Banks of New Zealand, to the New Zealand Monetary Commission, 1955

"I believe that banking institutions are more dangerous to our liberties than standing armies." 
~ Thomas Jefferson, US President 1801 - 1809

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." 
~ Napoleon Bonaparte, Emperor of France.

"If the American people ever allow private banks to control issue of their currency, first by inflation, then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." 
~ Thomas Jefferson in the debate over The Re-charter of the Bank Bill (1809)

"Money plays the largest part in determining the course of history." 
~ Karl Marx writing in the Communist Manifesto (1848)

"The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of consumers. By adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." 
~ Abraham Lincoln, US President 1861 - 1865. He created government issue money during the American Civil War and was assassinated in 1865 by John Wilkes Booth

"The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt civilization." 
~ Otto von Bismark (1815-1898), German Chancellor, after the Lincoln assassination

"That this House considers that the continued issue of all the means of exchange - be they coin, bank-notes or credit, largely passed on by cheques - by private firms as an interest-bearing debt against the public should cease forthwith; that the Sovereign power and duty of issuing money in all forms should be returned to the Crown, then to be put into circulation free of all debt and interest obligations." 
~ Captain Henry Kerby MP, in an Early Day Motion tabled in 1964

"Banks lend by creating credit. They create the means of payment out of nothing." 
~ Ralph M Hawtry, former Secretary to the Treasury

"our whole monetary system is dishonest, as it is debt-based... We did not vote for it. It grew upon us gradually but markedly since 1971 when the commodity-based system was abandoned." 
~ The Earl of Caithness, in a speech to the House of Lords, 1997

"Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal - that there is no human relation between master and slave." 
~ Leo Tolstoy, Russian author and writer

"It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning." 
~ Henry Ford, founder of the Ford Motor Company

"The modern banking system manufactures money out of nothing. The process is, perhaps, the most astounding piece of sleight of hand that was ever invented. Banks can in fact inflate, mint and un-mint the modern ledger-entry currency." 
~ Major L L B Angus

"The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent." 
~ John Kenneth Galbraith (1908 - 2006 ) former professor of economics at Harvard, writing in 'Money: Whence it came, where it went' (1975)

The Federal Reserve Bank - an Illegal, Unconstitutional Private Corporation, that has been Stealing Americans "Blind" Since the Federal Reserve Act was Passed (in Congressional Christmas "Recess") in 1913.

Whoever controls the volume of money in our country is absolute master of all
industry and commerce.  When you realize that the entire system is very easily
controlled, one way or another, by a few powerful men at the top, you will not
have to be told how periods of inflation and depression originate. 

~ James Garfield,
20th President of the United Stated
Assassinated, 1881

The information below is a quote from Representative Louis T. McFadden, who was elected to Congress in 1914 and served until 1934. While in Congress, he served as the Chairman of the Committee on Banking and Currency for 12 years, and the following speech was delivered by McFadden while in Congress, and is quoted from the Congressional Record. It should be noted that he died from "mysterious" causes and twice before his death, there were two assassination attempts on him. Many consider Rep. Louis McFadden to be an American "hero" for his attempts to abolish the Federal Reserve.

The following is the speech by Rep. Louis T. McFadden, as read into the U.S. Congressional Record:

"The Federal Reserve Board, ..., has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt...Our people's money to the extend of $1,200,000,000 has within the last few months been shipped abroad to redeem Federal Reserve Notes and to pay other gambling debts of the traitorous Federal Reserve Board and the Federal Reserve Banks.


1. The Federal Reserve (or "The Fed") is a PRIVATELY OWNED corporation. 

Below is the list of the owners of the 12 Central Banks in the USA:
- Rothschild Bank of London
- Rothschild Bank of Berlin
- Lazard Brothers of Paris
- Israel Moses Seif Banks of Italy
- Warburg Bank of Amsterdam
- Warburg Bank of Hamburg
- Lehman Brothers of New York
- Kuhn Loeb Bank of New York
- Goldman, Sachs of New York
- Chase Manhattan Bank of New York

In all, there are about 300 VERY POWERFUL, partly foreign individuals that owns America's Central Bank, but it is NOT owned or operated by the Citizens of the United States of America - it is a PRIVATELY OWNED corporation.

2. Although the FED is required to give back most of its PROFITS back to the Treasury Dept., there is NO ORGANIZATION that has the power to AUDIT the FED (not even the Congress or the IRS). This creates a HUGE opportunity for "creative accounting" to hide the profit that ROBS the U.S. Tax Payers of hundreds of billions of dollars, in for TRILLIONS of dollars EVERY YEAR.

3. Every year, a few Congressmen introduced a legislation to AUDIT the FED, and every year, the legislation is defeated. The owners of the FED is the most powerful, invisible lobbying power there is.

4. The owners of the FED own the controlling interests in ALL major media in the U.S.  Rockefeller, through Chase Manhattan bank, controls CBS and ABC and 28 other broadcasting firms. Each of the other owners of the FED also have controlling interest in the U.S. media - that only serves to report the news they (the "elites") want you to know about. 

This explains why the media have been silent about the FED scam.

The FED fraud is the biggest fraud and the longest cover-up in the U.S. today!

5. According to Article 1, Section 8 of the Constitution, the U.S. Congress has the power to print money: 
"The Congress shall have the coin money, regulate the value thereof."  

According to the Supreme Court, the Congress can NOT transfer its power to other organizations like the Federal Reserve.


After several attempts to push the Federal Reserve Banking Act through Congress, a group of bankers funded and staffed Woodrow Wilson's campaign for President. 

In 1913, Nelson Aldrich, maternal grandfather to the Rockefellers, pushed the Federal Reserve Act through Congress just before Christmas, when most Congressmen were on vacation. Naturally, president Wilson passed the Act when he was elected as a pay back to the bankers.


The U.S. government runs a huge deficit every year - this past year, over 1 Trillion dollars. To cover this deficit, the U.S. government issues bonds which are bought by the FED.

Despite what the U.S. Constitution says about who is responsible for printing America's currency, the private corporation - the FED, since 1913 has the exclusive POWER TO PRINT AMERICA'S MONEY, and the FED can buy any amount of the U.S. Government bonds at almost NO COST, except for the cost of printing the "money" which costs about 3 cents / $100. 

At this point, the owners of the FED already profit $99.97 for every 3 cents they invested to print the money. Basically, they exchange something that costs almost nothing to them with the U.S. Government Bonds the FED purchased from "OUR" federal government.

Since the FED can NOT be AUDITED by the IRS (or even by the U.S. Congress) most of THEIR profits can go anywhere the FED's owners want THEIR profits to go to - and these profits are NOT taxed! 

After buying the bonds, the owner of the FED can either:

1. Keep the bonds, and collect the interest the U.S. Government now OWES them.
2. Sell the bonds to the U.S. Tax Payers or foreigners.

In either case, the FED owners have profited $99.97 for every 3 cents it invested to print the money. Remember, the FED is a PRIVATELY OWNED corporation, just like the Federal Express. The profit of the FED goes to the FED owners.

The U.S. Government now owes the FED owners the interest on those bonds. Remember that the FED owners DO NOT EARN the bonds. They simply PRINT the money to buy the bonds. In other words, they created money out of thin air, and exchange it for the interest bearing bonds.

In order to pay for the bonds' interest, the U.S. Government taxes the U.S. population.

When a U.S. Citizen holding U.S. Government bonds receives his/her return of investment on the bonds, essentially the money he/she receives is the tax money he/she is paying to the Government.

When the OWNERS of the FED receives the interest on the BONDS they're holding, they are receiving that money for FREE - except for the initial $0.03 cents/$100 investment to print the money! Not only that, the FED owners receive the money TAX FREE.

Under the LAW, the FED is REQUIRED to RETURN its PROFIT back to the U.S. Treasury. However, NEITHER the Congress NOR the IRS have the POWER to AUDIT the FED. The FED has used this obvious loophole to profit via 'creative accounting'.

Consider this: every year, the FED profits by hundreds of billions of dollars by buying U.S. Government Bonds. Yet it only returns ~$20 billion to the U.S. Treasury. The rest of the profit has been spent as "Operational Expenses".

The FED expects us to believe that the FED operational expenses amounts to $100's billion dollars annually!!!

The truth is, those profits were spent as "DIVIDENDS TO SHAREHOLDERS"!!!!

Year after year, the FED owners bleed the U.S. Tax Payer dry by hundreds of billions of dollars. Keep this going, and the U.S. will go bankrupt in a few more years. Small wonder why the National Debt is increasing at its current rate.


1. The U.S. Congress has the option to buy back the FED at $450 millions (per Congressional Records). When the Congress does this, it will own back the billions of U.S. Government Bonds held by the FED. The U.S. Government will actually PROFIT by buying back the FED!  Also, the U.S. government no longer has to pay interests to the FED owners on those bonds.

2. Through their ownerships in the FED, FOREIGN POWERS CAN and WILL influence the U.S. economy. By controlling our interest rates and money supply, they can actually create economic disaster in the U.S., should the U.S. disagree with them.

3. Although the FED directors must be confirmed by the Senate, the awesome lobbying power of the FED owners makes this process meaningless. The owners of the FED can and will put whoever they wish in the position.

4. Abolishing the FED will lead to lower inflation. At this moment, the FED prints as much money as needed to buy the U.S. Government Bonds. Since the FED prints this MONEY out of THIN AIR, this leads to an INCREASE of MONEY SUPPLY, WITHOUT increase in GOODS/SERVICES. This, as all of us know it, leads to INFLATION.

If the general public buy those bonds with money that they EARNED by providing GOODS/SERVICES, the money supply level is constant in relation to the goods/services level. Thus, there is no inflationary pressure from selling these bonds.

5. Abolishing the FED will reduce the national debt level. By buying back the FED at $450 millions, the U.S. Government will buy back the billions of dollars of bonds held by the FED. Thus, the net effect is a reduction in national debt. After buying back the FED, the U.S. Government does not have to pay interest on those bonds it buys back, further reducing the national debt.

6. Abolishing the FED will lead to eventual balance budget. Today, even if the U.S. Economy only grows by a meager 2%/yr, the U.S. Government should be able to put 2% of U.S.' GDP dollars into circulation WITHOUT INFLATION.

Consider, if the goods/services grow by 2% and the money supply grows by 2%, the ratio of goods/services vs. money supply remains constant. Thus, no inflation is created.

The government can use this extra money supply to fund its project without raising taxes.

As long as the government does not print money more than the goods and services available in the U.S., there will be no inflationary pressures.

This had in fact been done with Executive Order 11110 of President Kennedy. Kennedy ordered the Treasury Dept. to print a U.S. GOVERNMENT NOTES (vs. the "private corporation's Federal Reserve Notes). In effect, Kennedy bypassed the FED by making the Treasury Department print "REAL" U.S. MONEY, instead of selling bonds to the FED for almost free, and for the FED to ILLEGALLY "profit" from the American people.

The sad fact is, the U.S. Government does not do this anymore. Instead, the U.S. Government sell bonds to the FED, which buys those bonds using money they don't earn. Thus, the U.S. Government must now pay interest on those money that it "borrows" from the FED.

7. By point (6) above, the U.S. Government can actually reduce taxes on everybody since it has more interest free money to spent in the amount equal to the growth of the U.S.' GDP.  REMEMBER!!!!  THIS "REAL" MONEY WILL NOT CAUSE INFLATION, since the money is printed along with the growth of the goods and services.

What you can do to save the United States of America

The FED should either be AUDITED every year, or be abolished. 

We believe the FED should be ABOLISHED as it is UN-constitutional to begin with as OUR Constitution states our Treasury Department, which is "owned" by the Citizens of the USA, is to print our currency and mint our coins, NOT A SEPARATE, PRIVATELY OWNED CORPORATION MADE UP OF THE "ELITES OF THE ELITE" - or so they think they are - and their "controlled" media and news corporations that spew garbage and totally biased "news."

We suggest you do the following:


Read the following:

a. U.S. Congressional Record
b. "The Federal Reserve Bank" by H.S. Kenan
c. "Repeal the Federal Reserve Bank" by Rev. Casimir Frank Gierut
d. "The Secrets of the Federal Reserve" by Mullins
e. "The Creature from Jekyll Island" by G. Edward Griffin
f.  "End the Fed" by Dr. Ron Paul

This is a MUST WATCH: "The Money Masters" Video. It's 3 ½ hours in length, but provides EVERYTHING you need to know about the "Evil Empire" which is the Federal Reserve. You can download the Money Masters video from the following link. 

The Money Masters documentary - Exposing the Illegal, Unconstitutional Federal Reserve

Support and Vote for Dr. Ron Paul for President of the U.S. in 2012!

When you are confident of the facts and information herein concerning the ILLEGAL and Un-constitutional FEDERAL RESERVE;

2. Call your Congressman and tell him to support the legislation to AUDIT the FED.

3. Call your representatives and ask them to support legislation introduced by Congressman Henry Gonzales to repeal the Federal Reserve Act of 1913.

4. Push for your home states to introduce and pass a legislation to end the FED scam. The following states have already done so:
Arizona, Washington, Arkansas, Idaho, Oregon, Indiana, and Texas.

Even if you live in these states, contact your representatives and tell them to support the legislation. THEY WILL LISTEN if you care to TELL THEM!!!

5. Ask your STATE and COUNTY government to abolish the FED. Since the FED is CONSTITUTIONALLY ILLEGAL, IT MUST BE ABOLISHED! 

Ask your state/county governments for the proper paperwork. 

If the U.S. Congress refuses to abolish the FED, your STATE/COUNTY governments can do it.

6. Collect signature on petitions calling for the end of the FED.

7. Tell friends and family about this fraud, and ask them for supports. Secrecy is the FED's main strength. Since the media has been quiet, no one even notice this FRAUD that goes on for decades.

Now it is up to the tax payer to be informed. Inform everyone you know about this, and be organized!!!

This website and information may be reproduced and distributed freely without any changes.

What is "the Gold Standard"?

The gold standard is a monetary standard under which the basic unit of currency is defined by a specific quantity (weight) of gold. The United States once had a "gold standard" that our monetary system was based upon.  A "pure" gold standard was used by most modern countries between the years 1879 and 1914.  Under the gold standard, the participating countries' currencies were "convertible" based on its gold value. For example, if the currency for country A was equal to 100 grains of gold, and the currency for country Z was equal to 50 grains of gold, then 1 A was equal to 2 Z.  In 1971, President Richard Nixon removed the tie between the dollar and gold thereby ending the predominance of gold in the international monetary system.

But, we should NOT return our America's banking system, once we abolish the Federal Reserve, to a Gold Standard, as the thieves that own the Federal Reserve STOLE ALL of America's Gold we HAD at Ft. Knox, by buying our gold at below-market prices. 

If we were to return to a Gold Standard, AFTER we abolish the Federal Reserve, the previous owners of the now defunct Federal Reserve, now having our Gold, would still own "our money" as it would be "backed" by THEIR gold - again, which used to be our gold.


Remarks by Governor Ben S. Bernanke at the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia

March 2, 2004

Money, Gold, and the Great Depression

I am pleased to be able to present the H. Parker Willis Lecture in Economic Policy here at Washington and Lee University. As you may know, Willis was an important figure in the early history of my current employer, the Federal Reserve System. While he was a professor at Washington and Lee, Willis advised Senator Carter Glass of Virginia, one of the key legislators involved in the founding of the Federal Reserve. Willis also served on the National Monetary Commission, which recommended the creation of the Federal Reserve, and he went on to become the research director at the Federal Reserve from 1918 to 1922. At the Federal Reserve, Willis pushed for the development of new and better economic statistics, facing the resistance of those who took the view that too many facts only confuse the issue. Willis was also the first editor of the Federal Reserve Bulletin, the official publication of the Fed, which in Willis's time as well as today provides a wealth of economic statistics. As an illustration of the intellectual atmosphere in Washington at the time he served, Willis reported that when the first copy of the Bulletin was presented to the Secretary of the Treasury, the esteemed Secretary replied, "This Government ain't going into the newspaper business."

Like Parker Willis, I was a professor myself before coming to the Federal Reserve Board. One topic of particular interest to me as a researcher was the performance of the Federal Reserve in its early days, particularly the part played by the young U.S. central bank in the Great Depression of the 1930s.1In honor of Willis's important contribution to the design and creation of the Federal Reserve, I will speak today about the role of the Federal Reserve and of monetary factors more generally in the origin and propagation of the Great Depression. Let me offer two caveats before I begin: First, as I mentioned, H. Parker Willis resigned from the Fed in 1922, to take a post at Columbia University; thus, he is not implicated in any of the mistakes that the Federal Reserve made in the late 1920s and early 1930s. Second, the views I will express today are my own and are not necessarily those of my colleagues in the Federal Reserve System.

The number of people with personal memory of the Great Depression is fast shrinking with the years, and to most of us the Depression is conveyed by grainy, black-and-white images of men in hats and long coats standing in bread lines. However, although the Depression was long ago--October this year will mark the seventy-fifth anniversary of the famous 1929 stock market crash--its influence is still very much with us. In particular, the experience of the Depression helped forge a consensus that the government bears the important responsibility of trying to stabilize the economy and the financial system, as well as of assisting people affected by economic downturns. Dozens of our most important government agencies and programs, ranging from social security (to assist the elderly and disabled) to federal deposit insurance (to eliminate banking panics) to the Securities and Exchange Commission (to regulate financial activities) were created in the 1930s, each a legacy of the Depression.

The impact that the experience of the Depression has had on views about the role of the government in the economy is easily understood when we recall the sheer magnitude of that economic downturn. During the major contraction phase of the Depression, between 1929 and 1933, real output in the United States fell nearly 30 percent. During the same period, according to retrospective studies, the unemployment rate rose from about 3 percent to nearly 25 percent, and many of those lucky enough to have a job were able to work only part-time. For comparison, between 1973 and 1975, in what was perhaps the most severe U.S. recession of the World War II era, real output fell 3.4 percent and the unemployment rate rose from about 4 percent to about 9 percent. Other features of the 1929-33 decline included a sharp deflation--prices fell at a rate of nearly 10 percent per year during the early 1930s--as well as a plummeting stock market, widespread bank failures, and a rash of defaults and bankruptcies by businesses and households. The economy improved after Franklin D. Roosevelt's inauguration in March 1933, but unemployment remained in the double digits for the rest of the decade, full recovery arriving only with the advent of World War II. Moreover, as I will discuss later, the Depression was international in scope, affecting most countries around the world not only the United States.

What caused the Depression? 

This question is a difficult one, but answering it is important if we are to draw the right lessons from the experience for economic policy. Solving the puzzle of the Depression is also crucial to the field of economics itself because of the light the solution would shed on our basic understanding of how the economy works.

During the Depression years and for many decades afterward, economists disagreed sharply on the sources of the economic and financial collapse of the 1930s. In contrast, during the past twenty years or so economic historians have come to a broad consensus about the causes of the Depression. A widening of the geographic focus of Depression research deserves much of the credit for this breakthrough. Before the 1980s, research on the causes of the Depression had considered primarily the experience of the United States. This attention to the U.S. case was appropriate to some degree, as the U.S. economy was then, as it is today, the world's largest; the decline in output and employment in the United States during the 1930s was especially severe; and many economists have argued that, to an important extent, the worldwide Depression began in the United States, spreading from here to other countries (Romer, 1993). However, in much the same way that a medical researcher cannot reliably infer the causes of an illness by studying one patient, diagnosing the causes of the Depression is easier when we have more patients (in this case, more national economies) to study. To explain the current consensus on the causes of the Depression, I will first describe the debate as it existed before 1980, and then discuss how the recent focus on international aspects of the Depression and the comparative analysis of the experiences of different countries have helped to resolve that debate.

I have already mentioned the sharp deflation of the price level that occurred during the contraction phase of the Depression, by far the most severe episode of deflation experienced in the United States before or since. Deflation, like inflation, tends to be closely linked to changes in the national money supply, defined as the sum of currency and bank deposits outstanding, and such was the case in the Depression. Like real output and prices, the U.S. money supply fell about one-third between 1929 and 1933, rising in subsequent years as output and prices rose.

While the fact that money, prices, and output all declined rapidly in the early years of the Depression is undeniable, the interpretation of that fact has been the subject of much controversy. Indeed, historically, much of the debate on the causes of the Great Depression has centered on the role of monetary factors, including both monetary policy and other influences on the national money supply, such as the condition of the banking system. Views have changed over time. During the Depression itself, and in several decades following, most economists argued that monetary factors were not an important cause of the Depression. For example, many observers pointed to the fact that nominal interest rates were close to zero during much of the Depression, concluding that monetary policy had been about as easy as possible yet had produced no tangible benefits to the economy. The attempt to use monetary policy to extricate an economy from a deep depression was often compared to "pushing on a string."

During the first decades after the Depression, most economists looked to developments on the real side of the economy for explanations, rather than to monetary factors. Some argued, for example, that overinvestment and overbuilding had taken place during the ebullient 1920s, leading to a crash when the returns on those investments proved to be less than expected. Another once-popular theory was that a chronic problem of "under-consumption"--the inability of households to purchase enough goods and services to utilize the economy's productive capacity--had precipitated the slump.

However, in 1963, Milton Friedman and Anna J. Schwartz transformed the debate about the Great Depression. That year saw the publication of their now-classic book, A Monetary History of the United States, 1867-1960. The Monetary History, the name by which the book is instantly recognized by any macroeconomist, examined in great detail the relationship between changes in the national money stock--whether determined by conscious policy or by more impersonal forces such as changes in the banking system--and changes in national income and prices. The broader objective of the book was to understand how monetary forces had influenced the U.S. economy over a nearly a century. In the process of pursuing this general objective, however, Friedman and Schwartz offered important new evidence and arguments about the role of monetary factors in the Great Depression. In contradiction to the prevalent view of the time, that money and monetary policy played at most a purely passive role in the Depression, Friedman and Schwartz argued that "the [economic] contraction is in fact a tragic testimonial to the importance of monetary forces" (Friedman and Schwartz, 1963, p. 300).

To support their view that monetary forces caused the Great Depression, Friedman and Schwartz revisited the historical record and identified a series of errors--errors of both commission and omission--made by the Federal Reserve in the late 1920s and early 1930s. According to Friedman and Schwartz, each of these policy mistakes led to an undesirable tightening of monetary policy, as reflected in sharp declines in the money supply. Drawing on their historical evidence about the effects of money on the economy, Friedman and Schwartz argued that the declines in the money stock generated by Fed actions--or inactions--could account for the drops in prices and output that subsequently occurred.2 Friedman and Schwartz emphasized at least four major errors by U.S. monetary policymakers. The Fed's first grave mistake, in their view, was the tightening of monetary policy that began in the spring of 1928 and continued until the stock market crash of October 1929 (see Hamilton, 1987, or Bernanke, 2002a, for further discussion). This tightening of monetary policy in 1928 did not seem particularly justified by the macroeconomic environment: The economy was only just emerging from a recession, commodity prices were declining sharply, and there was little hint of inflation. Why then did the Federal Reserve raise interest rates in 1928? The principal reason was the Fed's ongoing concern about speculation on Wall Street. Fed policymakers drew a sharp distinction between "productive" (that is, good) and "speculative" (bad) uses of credit, and they were concerned that bank lending to brokers and investors was fueling a speculative wave in the stock market. When the Fed's attempts to persuade banks not to lend for speculative purposes proved ineffective, Fed officials decided to dissuade lending directly by raising the policy interest rate.

The market crash of October 1929 showed, if anyone doubted it, that a concerted effort by the Fed can bring down stock prices. But the cost of this "victory" was very high. According to Friedman and Schwartz, the Fed's tight-money policies led to the onset of a recession in August 1929, according to the official dating by the National Bureau of Economic Research. The slowdown in economic activity, together with high interest rates, was in all likelihood the most important source of the stock market crash that followed in October. In other words, the market crash, rather than being the cause of the Depression, as popular legend has it, was in fact largely the result of an economic slowdown and the inappropriate monetary policies that preceded it. Of course, the stock market crash only worsened the economic situation, hurting consumer and business confidence and contributing to a still deeper downturn in 1930.

The second monetary policy action identified by Friedman and Schwartz occurred in September and October of 1931. At the time, as I will discuss in more detail later, the United States and the great majority of other nations were on the gold standard, a system in which the value of each currency is expressed in terms of ounces of gold. Under the gold standard, central banks stood ready to maintain the fixed values of their currencies by offering to trade gold for money at the legally determined rate of exchange.

The fact that, under the gold standard, the value of each currency was fixed in terms of gold implied that the rate of exchange between any two currencies within the gold standard system was likewise fixed. As with any system of fixed exchange rates, the gold standard was subject to speculative attack if investors doubted the ability of a country to maintain the value of its currency at the legally specified parity. In September 1931, following a period of financial upheaval in Europe that created concerns about British investments on the Continent, speculators attacked the British pound, presenting pounds to the Bank of England and demanding gold in return. Faced with the heavy demands of speculators for gold and a widespread loss of confidence in the pound, the Bank of England quickly depleted its gold reserves. Unable to continue supporting the pound at its official value, Great Britain was forced to leave the gold standard, allowing the pound to float freely, its value determined by market forces.

With the collapse of the pound, speculators turned their attention to the U.S. dollar, which (given the economic difficulties the United States was experiencing in the fall of 1931) looked to many to be the next currency in line for devaluation. Central banks as well as private investors converted a substantial quantity of dollar assets to gold in September and October of 1931, reducing the Federal Reserve's gold reserves. The speculative attack on the dollar also helped to create a panic in the U.S. banking system. 

Fearing imminent devaluation of the dollar, many foreign and domestic depositors withdrew their funds from U.S. banks in order to convert them into gold or other assets. The worsening economic situation also made depositors increasingly distrustful of banks as a place to keep their savings. During this period, deposit insurance was virtually nonexistent, so that the failure of a bank might cause depositors to lose all or most of their savings. Thus, depositors who feared that a bank might fail rushed to withdraw their funds. Banking panics, if severe enough, could become self-confirming prophecies. During the 1930s, thousands of U.S. banks experienced runs by depositors and subsequently failed.

Long-established central banking practice required that the Fed respond both to the speculative attack on the dollar and to the domestic banking panics. However, the Fed decided to ignore the plight of the banking system and to focus only on stopping the loss of gold reserves to protect the dollar. To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them. The Fed's strategy worked, in that the attack on the dollar subsided and the U.S. commitment to the gold standard was successfully defended, at least for the moment. However, once again the Fed had chosen to tighten monetary policy despite the fact that macroeconomic conditions--including an accelerating decline in output, prices, and the money supply--seemed to demand policy ease.

The third policy action highlighted by Friedman and Schwartz occurred in 1932. By the spring of that year, the Depression was well advanced, and Congress began to place considerable pressure on the Federal Reserve to ease monetary policy. The Board was quite reluctant to comply, but in response to the ongoing pressure the Board conducted open-market operations between April and June of 1932 designed to increase the national money supply and thus ease policy. These policy actions reduced interest rates on government bonds and corporate debt and appeared to arrest the decline in prices and economic activity. However, Fed officials remained ambivalent about their policy of monetary expansion. Some viewed the Depression as the necessary purging of financial excesses built up during the 1920s; in this view, slowing the economic collapse by easing monetary policy only delayed the inevitable adjustment. Other officials, noting among other indicators the very low level of nominal interest rates, concluded that monetary policy was in fact already quite easy and that no more should be done. These policymakers did not appear to appreciate that, even though nominal interest rates were very low, the ongoing deflation meant that the real cost of borrowing was very high because any loans would have to be repaid in dollars of much greater value (Meltzer, 2003). Thus monetary policy was not in fact easy at all, despite the very low level of nominal interest rates. In any event, Fed officials convinced themselves that the policy ease advocated by the Congress was not appropriate, and so when the Congress adjourned in July 1932, the Fed reversed the policy. By the latter part of the year, the economy had relapsed dramatically.

The fourth and final policy mistake emphasized by Friedman and Schwartz was the Fed's ongoing neglect of problems in the U.S. banking sector. As I have already described, the banking sector faced enormous pressure during the early 1930s. As depositor fears about the health of banks grew, runs on banks became increasingly common. A series of banking panics spread across the country, often affecting all the banks in a major city or even an entire region of the country. Between December 1930 and March 1933, when President Roosevelt declared a "banking holiday" that shut down the entire U.S. banking system, about half of U.S. banks either closed or merged with other banks. Surviving banks, rather than expanding their deposits and loans to replace those of the banks lost to panics, retrenched sharply.

The banking crisis had highly detrimental effects on the broader economy. Friedman and Schwartz emphasized the effects of bank failures on the money supply. Because bank deposits are a form of money, the closing of many banks greatly exacerbated the decline in the money supply. Moreover, afraid to leave their funds in banks, people hoarded cash, for example by burying their savings in coffee cans in the back yard. Hoarding effectively removed money from circulation, adding further to the deflationary pressures. Moreover, as I emphasized in early research of my own (Bernanke, 1983), the virtual shutting down of the U.S. banking system also deprived the economy of an important source of credit and other services normally provided by banks.

The Federal Reserve had the power at least to ameliorate the problems of the banks. For example, the Fed could have been more aggressive in lending cash to banks (taking their loans and other investments as collateral), or it could have simply put more cash in circulation. Either action would have made it easier for banks to obtain the cash necessary to pay off depositors, which might have stopped bank runs before they resulted in bank closings and failures. Indeed, a central element of the Federal Reserve's original mission had been to provide just this type of assistance to the banking system. The Fed's failure to fulfill its mission was, again, largely the result of the economic theories held by the Federal Reserve leadership. Many Fed officials appeared to subscribe to the infamous "liquidationist" thesis of Treasury Secretary Andrew Mellon, who argued that weeding out "weak" banks was a harsh but necessary prerequisite to the recovery of the banking system. Moreover, most of the failing banks were relatively small and not members of the Federal Reserve System, making their fate of less interest to the policymakers. In the end, Fed officials decided not to intervene in the banking crisis, contributing once again to the precipitous fall in the money supply.

Friedman and Schwartz discuss other episodes and policy actions as well, such as the Federal Reserve's misguided tightening of policy in 1937-38 which contributed to a new recession in those years. However, the four episodes I have described capture the gist of the Friedman and Schwartz argument that, for a variety of reasons, monetary policy was unnecessarily tight, both before the Depression began and during its most dramatic downward phase. As I have mentioned, Friedman and Schwartz had produced evidence from other historical periods that suggested that contractionary monetary policies can lead to declining prices and output. Friedman and Schwartz concluded therefore that they had found the smoking gun, evidence that much of the severity of the Great Depression could be attributed to monetary forces.

Friedman and Schwartz's arguments were highly influential but not universally accepted. For several decades after the Monetary History was published, a debate raged about the importance of monetary factors in the Depression. Opponents made several objections to the Friedman and Schwartz thesis that are worth highlighting here.

First, critics wondered whether the tightening of monetary policy during 1928 and 1929, though perhaps ill advised, was large enough to have led to such calamitous consequences.3 If the tightening of monetary policy before the stock market crash was not sufficient to account for the violence of the economic downturn, then other, possibly nonmonetary, factors may need to be considered as well.

A second question is whether the large decline in the money supply seen during the 1930s was primarily a cause or an effect of falling output and prices. As we have seen, Friedman and Schwartz argued that the decline in the money supply was causal. Suppose, though, for the sake of argument, that the Depression was the result primarily of nonmonetary factors, such as overspending and overinvestment during the 1920s. As incomes and spending decline, people need less money to carry out daily transactions. In this scenario, critics pointed out, the Fed would be justified in allowing the money supply to fall, because it would only be accommodating a decline in the amount of money that people want to hold. The decline in the money supply in this case would be a response to, not a cause of, the decline in output and prices. To put the question simply, we know that both the economy and the money stock contracted rapidly during the early 1930s, but was the monetary dog wagging the economic tail, or vice versa?

The focus of Friedman and Schwartz on the U.S. experience (by design, of course) raised other questions about their monetary explanation of the Depression. As I have mentioned, the Great Depression was a worldwide phenomenon, not confined to the United States. Indeed, some economies, such as that of Germany, began to decline before 1929. Although few countries escaped the Depression entirely, the severity of the episode varied widely across countries. The timing of recovery also varied considerably, with some countries beginning their recovery as early as 1931 or 1932, whereas others remained in the depths of depression as late as 1935 or 1936. How does Friedman and Schwartz's monetary thesis explain the worldwide nature of the onset of the Depression, and the differences in severity and timing observed in different countries?

That is where the debate stood around 1980. About that time, however, economic historians began to broaden their focus, shifting from a heavy emphasis on events in the United States during the 1930s to an increased attention to developments around the world. Moreover, rather than studying countries individually, this new scholarship took a comparative approach, asking specifically why some countries fared better than others in the 1930s. As I will explain, this research uncovered an important role for international monetary forces, as well as domestic monetary policies, in explaining the Depression. Specifically, the new research found that a complete understanding of the Depression requires attention to the operation of the international gold standard, the international monetary system of the time.4

As I have already mentioned, the gold standard is a monetary system in which each participating country defines its monetary unit in terms of a certain amount of gold. The setting of each currency's value in terms of gold defines a system of fixed exchange rates, in which the relative value of (say) the U.S. dollar and the British pound are fixed at a rate determined by the relative gold content of each currency. To maintain the gold standard, central banks had to promise to exchange actual gold for their paper currencies at the legal rate.

The gold standard appeared to be highly successful from about 1870 to the beginning of World War I in 1914. During the so-called "classical" gold standard period, international trade and capital flows expanded markedly, and central banks experienced relatively few problems ensuring that their currencies retained their legal value. The gold standard was suspended during World War I, however, because of disruptions to trade and international capital flows and because countries needed more financial flexibility to finance their war efforts. (The United States remained technically on the gold standard throughout the war, but with many restrictions.)

After 1918, when the war ended, nations around the world made extensive efforts to reconstitute the gold standard, believing that it would be a key element in the return to normal functioning of the international economic system. Great Britain was among the first of the major countries to return to the gold standard, in 1925, and by 1929 the great majority of the world's nations had done so.

Unlike the gold standard before World War I, however, the gold standard as reconstituted in the 1920s proved to be both unstable and destabilizing. Economic historians have identified a number of reasons why the reconstituted gold standard was so much less successful than its prewar counterpart. First, the war had left behind enormous economic destruction and dislocation. Major financial problems also remained, including both large government debts from the war and banking systems whose solvency had been deeply compromised by the war and by the periods of hyperinflation that followed in a number of countries. These underlying problems created stresses for the gold standard that had not existed to the same degree before the war.

Second, the new system lacked effective international leadership. During the classical period, the Bank of England, in operation since 1694, provided sophisticated management of the international system, with the cooperation of other major central banks. This leadership helped the system adjust to imbalances and strains; for example, a consortium of central banks might lend gold to one of their number that was experiencing a shortage of reserves. After the war, with Great Britain economically and financially depleted and the United States in ascendance, leadership of the international system shifted by default to the Federal Reserve. 

Unfortunately, the fledgling Federal Reserve, with its decentralized structure and its inexperienced and domestically focused leadership, did not prove up to the task of managing the international gold standard, a task that lingering hatreds and disputes from the war would have made difficult for even the most-sophisticated institution. With the lack of effective international leadership, most central banks of the 1920s and 1930s devoted little effort to supporting the overall stability of the international system and focused instead on conditions within their own countries.

Finally, the reconstituted gold standard lacked the credibility of its prewar counterpart. Before the war, the ideology of the gold standard was dominant, to the point that financial investors had no doubt that central banks would find a way to maintain the gold values of their currencies no matter what the circumstances. Because this conviction was so firm, speculators had little incentive to attack a major currency. After the war, in contrast, both economic views and the political balance of power had shifted in ways that reduced the influence of the gold standard ideology. For example, new labor-dominated political parties were skeptical about the utility of maintaining the gold standard if doing so increased unemployment. Ironically, reduced political and ideological support for the gold standard made it more difficult for central banks to maintain the gold values of their currencies, as speculators understood that the underlying commitment to adhere to the gold standard at all costs had been weakened significantly. Thus, speculative attacks became much more likely to succeed and hence more likely to occur.

With an international focus, and with particular attention to the role of the gold standard in the world economy, scholars have now been able to answer the questions regarding the monetary interpretation of the Depression that I raised earlier.

First, the existence of the gold standard helps to explain why the world economic decline was both deep and broadly international. Under the gold standard, the need to maintain a fixed exchange rate among currencies forces countries to adopt similar monetary policies. In particular, a central bank with limited gold reserves has no option but to raise its own interest rates when interest rates are being raised abroad; if it did not do so, it would quickly lose gold reserves as financial investors transferred their funds to countries where returns were higher. Hence, when the Federal Reserve raised interest rates in 1928 to fight stock market speculation, it inadvertently forced tightening of monetary policy in many other countries as well. This tightening abroad weakened the global economy, with effects that fed back to the U.S. economy and financial system.

Other countries' policies also contributed to a global monetary tightening during 1928 and 1929. For example, after France returned to the gold standard in 1928, it built up its gold reserves significantly, at the expense of other countries. The outflows of gold to France forced other countries to reduce their money supplies and to raise interest rates. Speculative attacks on currencies also became frequent as the Depression worsened, leading central banks to raise interest rates, much like the Federal Reserve did in 1931. Leadership from the Federal Reserve might possibly have produced better international cooperation and a more appropriate set of monetary policies. However, in the absence of that leadership, the worldwide monetary contraction proceeded apace. The result was a global economic decline that reinforced the effects of tight monetary policies in individual countries.

The transmission of monetary tightening through the gold standard also addresses the question of whether changes in the money supply helped cause the Depression or were simply a passive response to the declines in income and prices. Countries on the gold standard were often forced to contract their money supplies because of policy developments in other countries, not because of domestic events. The fact that these contractions in money supplies were invariably followed by declines in output and prices suggests that money was more a cause than an effect of the economic collapse in those countries.

Perhaps the most fascinating discovery arising from researchers' broader international focus is that the extent to which a country adhered to the gold standard and the severity of its depression were closely linked. In particular, the longer that a country remained committed to gold, the deeper its depression and the later its recovery (Choudhri and Kochin, 1980; Eichengreen and Sachs, 1985).

The willingness or ability of countries to remain on the gold standard despite the adverse developments of the 1930s varied quite a bit. A few countries did not join the gold standard system at all; these included Spain (which was embroiled in domestic political upheaval, eventually leading to civil war) and China (which used a silver monetary standard rather than a gold standard). A number of countries adopted the gold standard in the 1920s but left or were forced off gold relatively early, typically in 1931. Countries in this category included Great Britain, Japan, and several Scandinavian countries. Some countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933. And a few diehards, notably the so-called gold bloc, led by France and including Poland, Belgium, and Switzerland, remained on gold into 1935 or 1936.

If declines in the money supply induced by adherence to the gold standard were a principal reason for economic depression, then countries leaving gold earlier should have been able to avoid the worst of the Depression and begin an earlier process of recovery. The evidence strongly supports this implication. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which stubbornly remained on gold. As Friedman and Schwartz noted in their book, countries such as China--which used a silver standard rather than a gold standard--avoided the Depression almost entirely. The finding that the time at which a country left the gold standard is the key determinant of the severity of its depression and the timing of its recovery has been shown to hold for literally dozens of countries, including developing countries. This intriguing result not only provides additional evidence for the importance of monetary factors in the Depression, it also explains why the timing of recovery from the Depression differed across countries.

The finding that leaving the gold standard was the key to recovery from the Great Depression was certainly confirmed by the U.S. experience. One of the first actions of President Roosevelt was to eliminate the constraint on U.S. monetary policy created by the gold standard, first by allowing the dollar to float and then by resetting its value at a significantly lower level. The new President also addressed another major source of monetary contraction, the ongoing banking crisis. Within days of his inauguration, Roosevelt declared a "bank holiday," shutting down all the banks in the country. Banks were allowed to reopen only when certified to be in sound financial condition. Roosevelt pursued other measures to stabilize the banking system as well, such as the creation of a deposit insurance program. With the gold standard constraint removed and the banking system stabilized, the money supply and the price level began to rise. Between Roosevelt's coming to power in 1933 and the recession of 1937-38, the economy grew strongly.

I have only scratched the surface of the fascinating literature on the causes of the Great Depression, but it is time that I conclude. Economists have made a great deal of progress in understanding the Great Depression. Milton Friedman and Anna Schwartz deserve enormous credit for bringing the role of monetary factors to the fore in their Monetary History. However, expanding the research focus to include the experiences of a wide range of countries has both provided additional support for the role of monetary factors (including the international gold standard) and enriched our understanding of the causes of the Depression.

Some important lessons emerge from the story. One lesson is that ideas are critical. The gold standard orthodoxy, the adherence of some Federal Reserve policymakers to the liquidationist thesis, and the incorrect view that low nominal interest rates necessarily signaled monetary ease, all led policymakers astray, with disastrous consequences. We should not underestimate the need for careful research and analysis in guiding policy. Another lesson is that central banks and other governmental agencies have an important responsibility to maintain financial stability. The banking crises of the 1930s, both in the United States and abroad, were a significant source of output declines, both through their effects on money supplies and on credit supplies. Finally, perhaps the most important lesson of all is that price stability should be a key objective of monetary policy. By allowing persistent declines in the money supply and in the price level, the Federal Reserve of the late 1920s and 1930s greatly destabilized the U.S. economy and, through the workings of the gold standard, the economies of many other nations as well.


Bernanke, Ben (1983). "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review, 73, (June) pp. 257-76.
Bernanke, Ben (2000). Essays on the Great Depression. Princeton, N. J.: Princeton University Press.
Bernanke, Ben (2002a). "Asset-Price 'Bubbles' and Monetary Policy," before the New York chapter of the National Association for Business Economics, New York, New York, October 15. Available at
Bernanke, Ben (2002b). "On Milton Friedman's Ninetieth Birthday," at the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, November 8. Available at
Choudhri, Ehsan, and Levis Kochin (1980). "The Exchange Rate and the International Transmission of Business Cycle Disturbances: Some Evidence from the Great Depression," Journal of Money, Credit, and Banking, 12, pp. 565-74.
Eichengreen, Barry (1992). Golden Fetters: The Gold Standard and the Great Depression, 1919-1939. Oxford: Oxford University Press.
Eichengreen, Barry (2002). "Still Fettered after All These Years," National Bureau of Economic Research working paper no. 9276 (October).
Eichengreen, Barry, and Jeffrey Sachs (1985). "Exchange Rates and Economic Recovery in the 1930s," Journal of Economic History, 45, pp. 925-46.
Friedman, Milton, and Anna J. Schwartz (1963). A Monetary History of the United States, 1867-1960. Princeton, N.J.: Princeton University Press for NBER.
Hamilton, James (1987). "Monetary Factors in the Great Depression," Journal of Monetary Economics, 34, pp. 145-69.
Meltzer, Allan (2003). A History of the Federal Reserve, Volume I: 1913-1951. Chicago: The University of Chicago Press.
Romer, Christina (1993). "The Nation in Depression," Journal of Economic Perspectives, 7 (Spring), pp. 19-40.
Temin, Peter (1989). Lessons from the Great Depression. Cambridge, Mass.: MIT Press.


1. My professional articles on the Depression are collected in Bernanke (2000).
2. Bernanke (2002b) gives a more detailed discussion of the evidence presented by Friedman and Schwartz.
3. There was less debate about the period 1931-33, the most precipitous downward phase of the Depression, for which most economists were inclined to ascribe an important role to monetary factors.
4. Critical early research included Choudhri and Kochin (1980) and Eichengreen and Sachs (1985). Eichengreen (1992, 2002) provides the most extensive analysis of the role of the gold standard in causing and propagating the Great Depression. Temin (1989) provides a readable account with a slightly different perspective.


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