Johnson makes a new attempt to explain the principal causes of the Great Depression -- or, rather, revives an old explanation that has receded from view. It is that the sharp rise in prices during World War I, combined with a large increase in Indian nonmonetary demand for gold, left the world with a shortage of monetary gold. French monetary stabilization in 1927 left the franc notably undervalued, and an overly restrictive monetary policy led to a substantial withdrawal of gold from the rest of the world -- France's share of world monetary gold rose from 10 to 24 percent from 1927 to 1931 -- putting strong deflationary pressure on an already fragile world economy, especially London, its financial center. The Americans, British, and Germans made many mistakes as well, but the author attributes the main responsibility to French officials, who showed little interest in how the entire system would respond. This will not be the last word, but the story is persuasively told -- without equations, which, alas, probably means few young economists will read it.
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