Ben Bernanke Spoke of Printing Money and Distributing It from Helicopters and about Roosevelt's 40% Devaluation of the Dollar Against Gold As Effective Weapons Against Deflation

This doctrine of globally beneficial dollar devaluation in recession had got further embellishment in Bernanke’s reading of the Japanese experience of the 1990s. Bernanke sympathized with the view that where monetary policy became constrained (in bringing about recovery) by a zero-rate bound (inability of rates to fall below zero even though the equilibrium level of rates may indeed be negative), then devaluation was the way out of this (partly through generating inflation expectations) and internationally acceptable (not beggar-your-neighbour) in that all would gain from the return route to equilibrium. Bernanke, as recently appointed governor to the Federal Reserve, had reinforced this view in his notorious speech to the National Economists Club in Washington (November 2002) under the title of ‘Deflation: making sure it doesn’t happen here’.

Bernanke’s comments about printing money and distributing it from helicopters got the headlines at the time (and since). But in addition the new governor noted aloud:

Though a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from US history is Franklin Roosevelt’s 40% devaluation of the dollar against gold in 1933–4, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the US deflation remarkably quickly. Indeed consumer price inflation in the US, year-on-year, went from −10.3% in 1932 to −5.1% in 1933 to 3.4% in 1934. The economy grew strongly and by the way 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation.

--Brendan Brown, The Global Curse of the Federal Reserve: Manifesto for a Second Monetarist Revolution (Houndmills, UK: Palgrave Macmillan, 2011), 115.