Monetary Indicators With and Without a Gold Standard
One of Sumner's main objectives is to challenge other interpretive frameworks that have arisen in the aftermath of the Great Depression. He is especially pointed in his criticism of Keynes and others for seeing a liquidity trap at work, meaning that the public's demand for money was so extreme that no amount of monetary expansion could alleviate the shortfall in output and employment. Sumner traces the idea of the liquidity trap to the experience in early 1932, in which open-market purchases by the Federal Reserve were not effective in expanding the economy. Sumner writes,
In many respects, the period from April to July 1932 represented the worst three months of the entire Depression... the impact of the open market operations was mostly negated by gold outflows... It is ironic that the only real-world example of a liquidity trap in the entire General Theory actually shows something very different, the constraints imposed on policymakers by the international gold standard.