[hga]

While Jackson had a point (let's ignore that he himself was a major land speculator) and a particular bit of corruption of the above nature destroyed the 2nd Bank politically, the resulting denouncement (including requiring specie (i.e. gold) for payments of I forget) was as I recall one of the (if not the) longest recession/depressions in American history.

Yeah, the speculative excesses had to be wrung out of the system, and the sooner the better as Jackson points out, but if you destroy or allow the failure of the banking system in the process (that one had some of both) the result is horrible. See also: the Great Depression in the US.

That was the argument for the TARP, and we can't falsify it and never could have. Continuing the TARP sort of thing (note this reply is made without the benefit of reading the fine article), though, risks one or more Lost Decades as we've seen in Japan.

If you're lucky; we don't yet know the denouncement of what's happening over there (didn't Great Britian require a century to recover from the South Seas Bubble (due to many factors)?) and the US is in a different position than Japan was and is.

[jacoblyles]

On the other hand, resumption of specie payments following the greenback period during the Civil War was accompanied by economic growth (see Friedman's "Monetary History of the United States", one of these days I'll finish that book). There is no essential causal link between gold and depressions; if there were there wouldn't be so many goldbug economists.

[hga]

Agreed, although I'm not at all familiar with that era (not really much before the bus at the end of the 19th century, I too need to read Friedman's tome, right after I finish Human Action and 15 other good economic books :-) but I know this is very complicated.

For the Jackson bust I just cite the specie payment requirement because it was a shock to the system of a bad sort. Jackson intended to pop a bubble but I'm not sure he thought the result would be as bad or as long as it turned out to be.

The only gold "causal link" I (currently) believe in is that it is good to have during a deflation, since it's "The only liquidity that doesn't depend on anyone else's liquidity," to quote an essay in the newsletter of William Rees-Mogg and James Davidson (although it's probably not unique in having that property).