Modernism, Inflation and the Gold Standard in T.S. Eliot and Ezra Pound

The great inflation of the 1920s had a dramatic effect on Anglophone literary modernism. Ezra Pound, T.S. Eliot and Ernest Hemingway all recognized that financial signs had come unmoored from any objective reference, and their work explores the literary implications of representation's newly autonomous, performative power. Pound blamed the economic and cultural crisis on ‘usury.’ Following Aristotle, he conceived of usury as the unnatural reproduction of autonomous representation, and thus as the antithesis of natural sexual and semiotic fertility. He particularly deplored the historical role played by Samuel Loyd, the Victorian head of Lloyds Bank, who had cunningly manipulated the gold standard in order to give control of the economy to ‘usurers.’ In his financial journalism for Lloyds Bank Monthly, Eliot used the gold standard as an economic logos in order to facilitate usury. Pound saw that Eliot's theory of the ‘objective correlative’ was incompatible with the referential model of representation assumed by the gold standard.

A new look at historical monetary policy (and the great inflation) through the lens of a persistence-dependent policy rule

The origins of the Great Inflation, a central 20th-century U.S. macroeconomic event, remain contested. Prominent explanations are poor inflation forecasts or inaccurate output gap measurement. An alternative view is that the Federal Open Market Committee (FOMC) was unwilling to fight inflation, perhaps due to political pressures. Here, we sort this out via a novel econometric approach, disaggregating the real-time unemployment and inflation time series entering the FOMC historical policy reaction-function into persistence components, using one-sided Fourier filtering; this implicitly estimates the unemployment gap in actual use. We find compelling evidence for (economically interpretable) persistence-dependence in both variables. Furthermore, our results support the “unwilling to fight” view: the FOMC’s unemployment gap responses were essentially unchanged pre- and post-Volcker, while its inflation responses sharpened markedly starting with Volcker.