TITLE

A WORLD DEPRESSION?

AUTHOR(S)
Cleveland, Harold van B.; Brittain, W.H. Bruce
PUB. DATE
January 1975
SOURCE
Foreign Affairs;Jan1975, Vol. 53 Issue 2, p223
SOURCE TYPE
Periodical
DOC. TYPE
Article
ABSTRACT
Are current fears of world depression well founded or are they mainly a psychological phenomenon? Whereas the Great Depression resulted from a serious contraction of the leading powers’ money supply, the present recession is the return to normal following the 1970–72 monetary explosion. Both inflation and recession are caused by imbalance between money supply and money demand, but normally such imbalances are self‐limiting and short‐lived. In today's world, however, the adjustment is slow, unemployment and inflation continuing long after the slowdown in money growth, Central banks can step in to increase supply, but they cannot determine what happens to foreign assets (which depends on overall balance of payments), while exchange parities remain Intact:. In the 30's there was a chair) reaction, as the leading countries suffered from the deficiencies in the world's gold stock, Only by coming off the gold standard did Britain manages to avoid the depths of the German and American depressions. Now, with no currency convertible into gold money supplies are less threatened and bank liquidity more likely to be maintained. Even so the present, recession has been severe, and made worse by the quadrupling of the oil price. Yet it was also, necessary, if the industrial world were not ba be faced with an average inflation rate of 10–11% for the indefinite future, As it is, the rate of money growth has how increased in individual countries, while these has been a slowdown, in world money growth. The worst” effects of the oil increases are over, and the 1974–75 slump should be at an end. Large balance of payments deficits remain and there is fear of competitive devaluations and trade restrictions leading to depression. But monetary conditions in the‐, U.S. and Western Europe generally are easing and these fears seem groundless. It seems that gloomy prophets have conjured up most of the anxieties of the present in order to justify fears from quite different sources.
ACCESSION #
4854016

 

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