TY - JOUR
T1 - Interpreting new evidence about China and U.S. silver purchases
AU - Brandt, Loren
AU - Sargent, Thomas J.
N1 - Funding Information:
In the view of Friedman and Schwartz, China's adherence to a silver standard insulated it until about 1931 from the deflationary monetary disturbances that impinged on gold standard countries from 1929 to 1931. However, in 1931, Britain depreciated the pound against gold. Then in 1933, the United States depreciated the dollar against gold, and also began a silver purchase program whose consequence was to double the price of silver within three years. Friedman and Schwartz describe these measures, especially the U.S. silver purchase program, as setting off a deflationary process in China, in which a contraction of the money supply in China was a key link in a chain of causation originating with the U.S. policy toward silver. The money supply contraction in China was said to be caused by the drain of silver from China *This paper was completed while Brandt was a National Fellow at the Hoover Institution. An earlier version was presented at the 27th Annual Cliometfics Conference, May 1987. For very helpful and detailed comments, we are grateful to Milton Friedman, Thomas Rawski, Arthur Rolnick, Anna Schwartz, and Eugene White. Sargent's research was supported by National Science Foundation Grant NSF/SES8508935 to the University of Minnesota.
PY - 1989/1
Y1 - 1989/1
N2 - This paper offers a reinterpretation of the influence on China of America's silver policy in the early 1930's. Recently compiled evidence about events in China are described and interpreted in light of a model of free banking under a commodity standard. Our interpretation is that the U.S. silver purchase program did not set off a chain of bad economic events which eventually forced China off silver and onto a fiat standard. Rather, China was forced off silver by its own government, which wanted to make itself the beneficiary of the capital gain associated with the appreciation of silver and to relieve itself of the restrictions that are imposed on government finance by a commodity standard.
AB - This paper offers a reinterpretation of the influence on China of America's silver policy in the early 1930's. Recently compiled evidence about events in China are described and interpreted in light of a model of free banking under a commodity standard. Our interpretation is that the U.S. silver purchase program did not set off a chain of bad economic events which eventually forced China off silver and onto a fiat standard. Rather, China was forced off silver by its own government, which wanted to make itself the beneficiary of the capital gain associated with the appreciation of silver and to relieve itself of the restrictions that are imposed on government finance by a commodity standard.
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U2 - 10.1016/0304-3932(89)90060-3
DO - 10.1016/0304-3932(89)90060-3
M3 - Article
AN - SCOPUS:12944311966
VL - 23
SP - 31
EP - 51
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
SN - 0304-3932
IS - 1
ER -