Help with response about the Great Depression

[GeorgiaAvenger]

"Milton Friedman's writings contend the terrible contraction of the 30s was caused by tight money and worsened by the gold standard. His explanation is more plausible than it being attributable to a credit expansion and subsequent collapse. Federal Reserve Board Governor Bernanke agreed (FRB: Speech, Bernanke--Money, Gold, and the Great Depression --March 2, 2004)."

I am arguing with an economics "expert" and want to take down his arguments.

[swissaustrian]

The Gold Standard was destroyed by the massive global monetary expansion which happened during WWI. Subsequently, all major currencies were overvalued in terms of gold.
Monetarists (like Friedman) and Keynesians (like Bernanke) both also blackout the fact that the boom of the 1920s was caused by massive credit expansion. The Great Depression was the "correction" for that. Government policies (bank holidays, gold confiscations, crop destructions etc.) prevented a liquidation of all the bad debt. Instead, the world economy stayed anemic for over a decade and WWII started.

[GeorgiaAvenger]

The Gold Standard was destroyed by the massive global monetary expansion which happened during WWI. Subsequently, all major currencies were overvalued in terms of gold.
Monetarists (like Friedman) and Keynesians (like Bernanke) both also blackout the fact that the boom of the 1920s was caused by massive credit expansion. The Great Depression was the "correction" for that. Government policies (bank holidays, gold confiscations, crop destructions etc.) prevented a liquidation of all the bad debt. Instead, the world economy stayed anemic for over a decade and WWII started.

So how was money contraction factored in?

Was it necessary because of the inflation?

[camp_steveo]

Here is my best ammo on GD:

Not-So-Great Depression

&

FDR's policies prolonged Depression by 7 years, UCLA economists calculate

[swissaustrian]

So how was money contraction factored in?

Was it necessary because of the inflation?

It was necessary and they should have let prices collapse instead of propping them up by destroying crops and revaluing against gold.

[camp_steveo]

I would just say that whatever causes these things to happen is something we can talk about, but these attempts to 'stimulate' the economy with govt intervention are a fallacy. We have history as evidence.

[GeorgiaAvenger]

It was necessary and they should have let prices collapse instead of propping them up by destroying crops and revaluing against gold.

Why exactly was it necessary? Was inflation run away?

[swissaustrian]

By the way: Milton Friedman predicted that FED would overreact to a new Depression, instead of underreacting like (in his opinion) in the 1930s.

[swissaustrian]

Why exactly was it necessary? Was inflation run away?

Asset inflation was rampant, because the banks sucked everyone into the stock market with cheap credit. Consumer prices were'nt extraordinary high.

[Seraphim]

Yes, this.

The reason why the gold standard extended the depression was not the gold standard itself, but that "they" pegged the nominal price of gold TOO LOW and extended the deflationary spiral. It was not a true gold standard. It was a quasi, centralized, arbitrary price of gold that was NOT reflective of true value.

It was necessary and they should have let prices collapse instead of propping them up by destroying crops and revaluing against gold.