I frequently debate the issue of whether serious slumps are triggered by economic crisis or tight money. In my own view it is typically tight money, with economic anxiety being a symptom of NGDP that is falling. How would we check my speculation?

While cleaning up my workplace at Bentley, I found a classic NYT post from June 11, 1933:

Wall Street notes an extraordinary distinction between the attitude toward the war debt issue last December and that of the present-time. Economic circles started to become apprehensive concerning the war debt issue well before before December 15, last year. By late November the pound sterling had fallen into a record low of $3.14 1/2 and the economic markets were seriously depressed. In the current time, even though the war debts repayments are due by next Thursday, there's been very little discussion of the topic in economic circles, along with the probabilities of of default that is wholesale have have gone the markets unperturbed.

Why did the markets abruptly stop caring about the war debts concern in June 1933? For the same reason-they suddenly began caring regarding the war debts concern in mid-1931. The financial markets when they led to devaluation fears, which induced huge gold hoarding were disturbed by war debts. By June 1933, the US was on the US no longer exerted a deflationary effect off hence, and the gold standard gold hoarding. However, gold hoarding always been a difficulty for nations still like France, on the gold standard.

In my e-book entitled The Midas Paradox, I did a really considerable empirical research of the question. The Andre1 of German war debt bonds abruptly become very correlated with US stock indices in mid-1931 (when Germany experienced financial problems), and this continued through 1932. Fears of default that was German were triggering a loss in confidence in the global gold standard. As Germany adopted the UK de-valued in September 1931 and also trade controls in July 1931, that loss of self-confidence was justified. At that that time people began fretting about in regards to a US devaluation, and gold hoarding rose sharply.