Episode Overview

Episode Title: George Selgin on the New Deal, Regime Uncertainty, and What Really Ended the Great Depression
Podcast: Conversations with Tyler
Date: October 15, 2025
Host: Tyler Cowen (A)
Guest: George Selgin (B), Senior Fellow at the Cato Institute, author of "False Dawn: The New Deal and the Promise of Recovery 1933-1947"

In this live episode, Tyler Cowen sits down with economic historian and monetary theorist George Selgin to dissect the New Deal, scrutinize regime uncertainty, and explore what truly ended the Great Depression. The conversation traverses key policies of the 1930s, misperceptions about government intervention, monetary versus fiscal solutions, comparative international banking regimes, and the persistent dilemmas of central banking—all distilled through Selgin's characteristic clarity and grounded skepticism.

Main Themes & Structure

• Myths & Realities of the New Deal
• Monetary Policy, Gold, and Recovery
• Rapid-Fire Evaluations of Major New Deal Policies
• Regime Uncertainty and Its Consequences
• Comparative Economic Thought of the 1930s
• Banking Structure: Decentralization versus Concentration
• Central Banking, Dollarization, and the Gold Standard
• Stablecoins, Regulation, and Modern Banking
• Personal Reflections and Audience Q&A

Key Discussion Points & Insights

1. What Mattered in the New Deal? (01:25 – 02:18)

• Selgin Rejects Simplistic Summaries
  A: If we shrink the New Deal to, “Revaluing gold helped recovery; NIRA hurt recovery,” is that the truth?
  B: “No, because a big part of the truth that leaves out is what the New Deal didn’t do to achieve recovery… it made very little use of fiscal or monetary stimulus.” (01:47)

• Modern Economic Stimulus Misconceptions

  • The New Deal wasn’t a Keynesian stimulus program as popularly believed.

2. Did Monetary Policy (Revaluing Gold) Save the Day? (02:18 – 04:41)

• Initial Burst, Then Fizzle

  • Early recovery in manufacturing in 1933–34 (7-8% output growth) was real but temporary, partly due to anticipation of price controls and expectations management, not just gold revaluation.
  • Later, European gold inflows (fearing Nazi Germany) “kept the progress going… quite unintentional help.” (03:39)

• Could Gold Policy Have Been Better?

  • Roosevelt’s prolonged, experimental approach harmed confidence; a clear, prompt devaluation would’ve worked better, as Keynes advised.

“What Roosevelt did was to engage in this crazy gold purchase program for quite a few months, based on a harebrained theory by a fellow named George Warren… didn’t happen.” (05:12)

3. Rapid-Fire: Major New Deal Policies (06:43 – 13:26)

Selgin grades key policies, with quick rationales:

• Glass-Steagall (1932): Irrelevant to recovery. Investment/commercial bank separation didn’t address actual causes.
• Reconstruction Finance Corporation: Lending to banks—mostly hurt; recapitalizations—helped stabilize banks.
• Agricultural Adjustment Act: Bad. Dubious theory, paid farms to produce less, feeble aggregate demand impact.
• Banking Act of 1933 (Deposit Insurance): Marginally good for immediate stabilization, but effect exaggerated. Roosevelt actually opposed deposit insurance initially.
• Federal Reserve Act of 1935: Centralized power but no monetary expansion followed, so the reform itself did little for recovery.

4. Fiscal Policy Counterfactual (13:26 – 15:56)

• If Selgin Were "Dictator"
  • Would have spent more (if possible), relaxed regressive taxes, but emphasizes the primacy of monetary policy for that period.

“I would have favored more fiscal stimulus … But I want to say I would have put more emphasis on monetary policy, which wasn’t taken advantage of.” (14:02)

5. Smoot-Hawley & Policy/Regime Uncertainty (15:56 – 18:39)

• Smoot-Hawley Tariff: Small, not decisive per Doug Irwin’s research.
• “Regime Uncertainty” far more damaging. It's not policy per se, but not knowing “what the heck is coming,” deterring investment.

“[Regime uncertainty] was a big barrier to recovery during the 30s.” (18:33)

6. The Second Great Depression (1937-38) (18:39 – 21:07)

• Perfect storm: Simultaneous monetary tightening (Fed raises reserve requirements; Treasury sterilizes gold), plus fiscal retrenchment, converged to trigger severe contraction.

“A sort of perfect storm of bad policies.” (18:46)

7. Economic Thinkers of the Era (21:07 – 30:15)

• Keynes’s Advice to Roosevelt:
  • Often misunderstood—his direct recommendations focused on regime certainty, pro-investment confidence, and boosting demand, but not on gold purchase experiments or price controls.
  • Memorable quote:
    “The things Keynes had to say to Roosevelt directly… his one meeting, Keynes advice on how the US should deal with the depression and try to get out was very sound.” (21:41)
• Austrian Economists:
  • Hayek et al. made inconsistent recommendations—not reconciling theory (restore spending) and policy (supporting austerity, gold standard at all costs).

“Their policy recommendations were not necessarily consistent with their theories.” (26:54)

• Chicago School:
  • Advocated public works spending early; not as “classical” as Keynes caricatured them.

8. American vs. Foreign Banking Systems (30:15 – 36:33)

• On Centralization:
  • Branch banking and concentration stabilized some systems (e.g., Canada), but American market-driven decentralization ultimately built superior capital markets.

“Since 1933, we have created a vast system of deposit guarantees and so have introduced a huge moral hazard problem…” (31:30)

• Moral hazard means pre-1933 freedoms (branching, entry) become risky after deposit insurance.

• Would Fewer, Big Banks Be Better?

  • Not necessarily; true competition requires both free entry and lack of guarantees—neither Canada nor the US has ever had both.
  • Constitutional barriers ensure government bailouts will always be a risk for big U.S. banks.

9. Quantity Theory, Central Bank Independence & Gold Standard (36:33 – 44:22)

• Quantity Theory of Money:
  • Weak empirical support in recent years due to velocity variability and financial innovation.

“Velocity is a constant or very stable value. And it isn’t.” (38:21)

• Fed Independence:

  • Thin but crucial—must be defended.

• Gold Standard in One Country?

  • Impossible today due to unstable global demand; local gold standards are not viable.

“As far as I’m concerned, it's out.” (41:59)

• Free Banking Without Gold:
  • Possible, but only robust with reforms to Fed policy (ideally NGDP targeting, automated monetary base, “night watchman Fed”).

10. Dollarization, Emerging Markets, and Policy Advice (44:22 – 46:51)

• Dollarization suitable for chronically mismanaged economies, but always a second-best solution (“lesser of evils”).

“If the economy… has a long enough track record of failing with all other possible arrangements, it's time to take the dollarization alternative seriously." (44:59)

11. Stablecoins & The Future of Banking (46:51 – 49:16)

• Should Stablecoins be Allowed to Pay Interest?
  • Competition with banks is not itself a policy justification.

“If we could envision a stablecoin industry that gives us all everything we want… and so we do dispense with banks altogether. Well, so what? It's like replacing horses and buggies with automobiles.” (48:12)

• The real need is good regulation for stablecoins, not protecting incumbent banks.

12. George Selgin's Personal Side (49:16 – 56:46)

• Owning 100 Donkeys

  • (Donor/adoption at a donkey sanctuary in Spain.) “It’s a fractional reserve donkey place, so turns out they only have 30 donkeys. If I were to stage a run right now, they'd go broke.”
    (50:31)

• On Becoming Less Libertarian:

  • Never a pure libertarian; skeptical of extreme positions, values evidence and practicality, especially on monetary issues.

“I don’t hold strong opinions about a lot of economic policy issues because I just don’t pretend to know enough.” (51:36)

• Life in Andalusia, Spain:
  • Surprised by the warmth of locals; several personal anecdotes.

13. Audience Q&A Highlights (57:07 – 68:04)

• Eurozone: Net positive or negative?

  • Mixed bag; single currency good, but bureaucratic burden high.

• What if WWII hadn’t happened?

  • The real postwar recovery came from pro-business government attitudes, not just spending.

“That something else was to change the attitude of government towards business from the hostility it exhibited during the New Deal to... overly cozy cooperation…” (59:35)

• Would policymakers ever allow productivity-driven deflation?

  • Not anytime soon; would require a major shift in mindset and expectations.

• Did 1930s innovation help?

  • Technical progress expanded potential output, but output gap worsened until demand revived.

• On Fed independence post-Supreme Court rulings:

  • More political control would lead to “fiscal dominance” and push for looser monetary policy; independence, even if imperfect, is vital for stability.

Notable Quotes & Moments

• On gold policy:
  "What Roosevelt did was to engage in this crazy gold purchase program for quite a few months..." (05:12)

• On uncertainty:
  "Regime uncertainty is a whole different matter, because the problem there is not that you anticipate a policy and anticipate its consequences, but that you just don't know what the heck's coming.” (16:58)

• On fiscal and monetary policy roles:
  "I would have favored more fiscal stimulus ... But I want to say I would have put more emphasis on monetary policy." (14:02)

• On stablecoins:
  “If we could envision... a stablecoin industry that gives us all everything we want... and so we do dispense with banks altogether. Well, so what?” (48:12)

• On banking structure:
  “We've gone from a system where freedom would have been and was desirable, more freedom because the guarantees that would have encouraged its abuse, that freedom's abuse weren't present, to a system where the same freedoms are not necessarily a good thing because guarantees have corrupted the incentives.” (31:30)

Timestamps for Important Segments

• Main New Deal Thesis: 01:25 - 02:18
• Revaluing Gold & Recovery: 02:18 - 04:41
• Policy-by-Policy Grades: 06:43 - 13:26
• Fiscal vs. Monetary: What Should Have Been Done: 13:26 - 15:56
• Smoot-Hawley & Regime Uncertainty: 15:56 - 18:39
• 1937-38 “Second Depression”: 18:39 - 21:07
• Who Got Things Right in the 30s?: 21:07 - 30:15
• US vs. International Banking Models: 30:15 - 36:33
• Quantity Theory Debate: 36:33 - 41:08
• Gold Standard Viability Today: 41:45 - 44:22
• Dollarization: 44:22 - 46:51
• Stablecoin Regulation: 46:51 - 49:16
• Donkeys & Life in Spain: 49:16 - 56:46
• Audience Q&A: 57:07 - 68:04

Tone & Style

Selgin mixes scholarly rigor with direct, wry commentary and occasional self-deprecation. Cowen’s questioning is rapid-fire and probing, often inviting Selgin to clarify complex historical arguments in modern terms. Much of the episode alternates between myth-busting and nuanced, conditional summary—marked by an openness to uncertainty and humility about what policy can accomplish.

For the Listener

If you want a single takeaway:
George Selgin’s reassessment places less weight on iconic New Deal interventions and more on regime uncertainty, the absence of robust monetary/fiscal stimulus, and how unintentional international events shaped America’s recovery from the Great Depression.

For further reading:
Selgin’s new book "False Dawn" is recommended by both Tyler and Selgin himself as the best place to explore these themes in detail.

Further Notable Moments

• "Fractional reserve donkey place" joke about his 100 adopted donkeys in Spain—an economist’s humor applied to animals (50:31).
• Selgin on policy evolution: Never “dogmatically” libertarian and open to pragmatic government roles, especially in money.

Summary Table: Selgin’s Quick Judgments on New Deal Policies

| Policy | Grade | Rationale | |-----------------------------------|--------------------|-------------------------------------------------| | Revaluing Gold | Good, best part | Prompt, clear devaluation would've been better | | National Industrial Recovery Act | Hurt recovery | Price controls, regime uncertainty | | Glass-Steagall (separation) | Irrelevant | Did not address core Depression drivers | | RFC Lending | Hurt recovery | Participation stigma, ineffective | | RFC Recapitalization | Helped recovery | Direct bank recapitalization worked | | Agricultural Adjustment Act | Bad | Doubtful theory, negative supply effect | | Banking Act 1933 (Deposit Ins.) | Slightly helpful | Overrated role, not the key to stabilization | | Fed Reserve Act 1935 (Central.) | Missed opportunity | No actual expansionary policy |

Memorable Closing Lines

• On the inability to restore gold credibility:
  “If tomorrow the Federal Reserve said, okay, you can have so many ounces of gold for every... dollars, a wise public... would go tomorrow and take the gold, just in case, right? And that would be the end of it." (54:15)

• Personal humility and love of donkeys and Spanish life—embracing the unpredictable and practical over abstraction.

Recommended segment for new listeners:
The rapid-fire policy evaluation (06:43 – 13:26) and Selgin’s thoughtful take on regime uncertainty (16:58 – 18:39) offer the most concentrated insight into the episode’s central arguments.

For more:
Find the full transcript and links at conversationswithtyler.com.