Recessions, Inflation and the Gold Standard
September 21, 2010

Following the NBER's decision on the end-date for the 2007 recession, I posted my Market and Recessions charts, which illustrate the relative frequency of recessions over the past 140 years.

Here's another look at US recession history, this time with an overlay of inflation/deflation and a timeline for the gold standard.

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The inflation/deflation data is from the Bureau of Labor Statistics (BLS), which has compiled Consumer Price Index data since 1913 (BLS historic data). The earlier data comes from Warren and Pearson's price index. The spliced series is available at Yale Professor Robert Shiller's website.

The oscillation between inflationary/deflationary extremes is highly correlated with the recessionary woes of the first six decades in our snapshot. The correlation with the gold standard is also clear, although the conclusions one might draw will inevitably be controversial. Abandoning gold in favor of floating the US currency was only one of many developments that have enabled the government to expand its role in managing the economy. Thus it's no surprise that market mavens perform an autopsy on every sentence in the FOMC meeting minutes.