How Premature Austerity Caused A Recession And The Market Crash Of 1937

WikimediaNow that sequestration has hit, people are wondering whether we're going to see another 1937.

That's the year that brought America a 12-month-long "recession-within-a-depression."

The Dow also fell 47 percent.

But there remains disagreement about what caused this event.

Keynesians like Paul Krugman argue it was indeed the result of Roosevelt's decision to curb New Deal spending.

Monetarists, meanwhile, believe fears of inflation choked off business spending.

And still a third prominent economist, Dartmouth's Douglas Irwin, has recently written it was the result of gold sterilization — that is, federal gold reserves out of the monetary supply.

Before we determine who's right, we wanted to go back and see what contemporary accounts were saying.