section_path: Course/The gold standard and the spreading of global depression
section_name: The gold standard and the spreading of global depression
paragraph_text: The gold standard and the spreading of global depression
  
  The gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and a monetary contraction first-hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates. Under the gold standard's price–specie flow mechanism, countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline (deflation).
  
  There is also consensus that protectionist policies, and primarily the passage of the Smoot–Hawley Tariff Act, helped to exacerbate, or even cause the Great Depression.