depression monetary policy objective: analyze the monetary policy of the great depression
TRANSCRIPT
Depression Monetary Policy
Objective: Analyze the Monetary Policy of the Great Depression
HistoryPanic 1893
Overbuilding of RailroadsRun on gold supply
(populism)Banks closed
Panic 1907NYSE fell 50%Run on banksBanks closed
The FED1913 – Federal Reserve
Act Response to Panic of
1907 Run on Banks
Created a central bank to run monetary policy for US Goal
maximum employmentStable pricesInterest rates
Make sure Banks DON’T FAIL for no reason
Monetary PolicySavings during 20s
declined
Banks reckless with money invest in stocks
Less money = less loans
Fed allowed banks to fail
Could not loan money – no gold to support loan
Hoover’s approach
Leave it alone approach
Smoot-Hawley Tariff
Cut taxes for rich – lead to deficit for government
Then raised taxes when saw the problem Including a tax on checks (2
cents = 30 cents today)
HooverAsked business not
to cut wages
Increase government spending
1932 started to have public works projects – too late
FDR’s RoleFDR closed banks
for 3 days
FEDS put billions of dollars back in circulation
Got rid of Gold Standard