The gold standard doesn't lead to austerity just like the Euro didn't, just like the Doller didn't in many countries that used it. Having a shitty economy does.

And your own statement makes the causality clear, something happen with gold (ie the money supply). So that clearly is the root cause, so why are you disagreeing?

Austerity is one potential thing that people can do in response, but they can do others. And if they do it or not, a global crisis is gone suck.

> And it was ended by expansionist policies in the US and the Nazi Germany.

Wrong. The major US recovery didn't happen when massive spending increase happened. You will see that the initial recovery well well on its way once the US left the gold standard. The NRA was adopted and growth essentially stopped until NRA was removed.

The old text book story of 'Hoover was an evil austerity guy, and then FDR came and 2 days later he spend 50% of GDP and magically the economy got better' is complete incompatible with the data.

FDR intervention other then leaving the gold standard and the bank holy-day (a Hover area policy implemented in FDR turn) were macro economically net neutral at best, and more likely negative. Go look at the Blue Eagle Club or killing 10000s of pigs, if Trump did these things now people would lose their shit.

The US economy improved when FDR finally kicked out all his dumb advisers and replaced them with actually people who knew what they were doing, and they got ready for WW2. And then after WW2 many of those people stayed, and the policies continued. And it didn't hurt the rest of the world was in need for exports.

And please don't buy into the Nazi propaganda about how Hitler came to power build the Autobahn and saved the country, literally just propaganda. The reality is, by 1933 the economy, globally and in Germany was already growing again. The deflation caused by the gold standard had mostly been adjusted to, because of the natural adjustment and hurt, and the changing polices of the major economy.

Even had Germany continue under the previous government, their economy would have done perfectly fine in the 1930s. In fact the primary guy who ran the economy was a guy from the previous government who spent years holding Hitler spending habits back as much as he could, until he got fired. But of course its also easier to spend more if you stop paying debt.

> The UK did not do austerity, and the 1929 downturn did not affect them as strongly. They had a 5% GDP drop, compared to almost 30% in the US, and 16% in Germany.

The UK had plenty of gold and did allow gold outflow, they did the right thing in terms of the global gold standard. The problem is that at some point they thought they were losing 'to much'. So decided to drop the standard, turns out, this was a good idea. Spending was pretty constant during that time period, they neither did austerity nor did they engage in massive stimulus spending.

The US had the worst crisis and their financials were fine. They had low spending and low debt. They didn't do much 'austerity' before 1929 because they didn't have any reason to and they couldn't really cut much with austerity anyway as they spend so little anyway.

So you can not correlate 'level of austerity' before 1929. And even after, the deciding factor for countries doing well or not was if they were on the gold standard or not. If you left the gold standard and you did austerity you did fine. If you stayed on the gold standard and did austerity, you didn't do so well but by 1933 you would be growing again too.

> Indeed. And the gold standard basically required the countries to practice the austerity.

... it didn't. It would just require countries to be OK with massive gold outflows (if they had it) and much worse debt deals and in the 1930s most countries didn't think it was viable to go to high debt levels at high interest.

In the US or example, there was a huge gold reserve and the gold standard restricted them literally not at all as papers had shown. Any policy in regards to fiscal spending was 100% in the power of the politicians, gold standard or not. It was simply the central bankers who decided on a specific policy, that lead to massive gold accumulation in the US. The same goes for other major economies their fiscal policies could be conducted whatever the gold standard did, they just didn't want to.

What you also don't talk about is that the massive WW1 debt were another reasons for government trying to save money. Germany couldn't really default(they thought) and leaving gold would have devalued their currency and increase their debt. Now this would have still been the right thing to do, but they understandable didn't really do that. Other countries had issues like that too.

Governments going bust was reasonable common, no IMF. International bond markets were not as developed. There was massive inter-governmental debt. If you go fully bust revolution was a real fear (or at least that what many believed). So its understandable why many mainstream politicians didn't want to do anything crazy.

So its not really accurate to say 'gold standard required austerity', it was more like, the complete international system depended on a network of standards, debt and obligations. And as gold got worse, all of those relationships got worse at the same time.

But to be clear, yes the gold standard (as it was designed) was bad and leaving it was good. Doing austerity in response wasn't a good idea but not doing austerity certainty wasn't a solution.

Just like if I attack you with a knife and you run into a wall, it isn't the wall's fault. Sure it would have been better not to run into a wall, but see people didn't really expect attacks with knifes. Because the pre-WW1 gold standard and pre-WW1 financial and debt markets just worked competently differently, WW1 changed everything.