Reply to Hortlund's "Defense of the Real Bills Doctrine"

Abstract

IN A CRITIQUE OF MY PAPER ON “GOLD STANDARDS AND THE Real Bills Doctrine in U.S. Monetary Policy†that appeared in Econ Journal Watch (August 2005), Per Hortlund has raised several interesting issues about the Real Bills Doctrine (RBD). As Hortlund observes, my article had two major themes, first, the innocence of the gold standard for the monetary infelicities that caused the Great Contraction of 1929-1933, and, second, the culpability of the RBD for the debacle. Hortlund accepts my defense of the gold standard. However, he finds some arguments to support a case for the RBD, and he raises an important issue concerning the substance of the RBD and its implementation as policy during 1929-1933, part of which I thoroughly accept.