Roosevelt's Great Depression

[Toro]

And yet the capitalism YOU want to practice brought US the first GOP great depression,

dumbto3 has learned 110 times that Hoover and FDR were liberals yet still blames Depression on GOP while experts agree it was caused by mistaken monetary policy. You can't be dumber
than dumbto3.

WHAT ROLE DID THE FED PLAY IN CAUSING THE GREAT DEPRESSION?

A favorite conservative argument is that the Federal Reserve Board caused the Great Depression by contracting the money supply.

This is a complete myth. According to the Federal Reserve's own records, at no time did the Fed pull money out of the system. Although it's true that the money supply contracted 31 percent between 1929 and 1933, this was not because of the Fed. Rather, the contraction was caused by three dramatic runs on banks, which would close 10,000 banks by 1933. So many failures were significant, because bank deposits formed 92 percent of all the money in circulation.


To see why the Federal Reserve did not cause this contraction, recall that the Fed has at least two methods of increasing the money supply. By far the most common and important method is buying U.S. debt from commercial banks, in the form of U.S. securities. The lesser way is to cut the prime interest rate that the Fed charges commercial banks.

Between October 1929 and February 1930, the Fed actually pumped significant money into the economy. It made major purchases of U.S. securities, and cut interest rates from 6 to 4 percent.

After this sudden infusion of money, however, the Fed made only very modest purchases of securities. It cut the discount rate only twice between March 1930 and September 1931. In the final months of 1931 it briefly raised the rate twice, but then cut it again in 1932. The modest security purchases counterbalanced the brief raises in rates and resulted in no significant change in the amount of money available to the public. However, this period of inaction by the Fed is the target of much criticism, as we shall see.

In 1932, the Fed overcame its idleness and once again made large purchases of U.S. securities.

The Run on Banks


So what caused a 31-percent contraction in the money supply? Pretty clearly, the public run on banks. The first banking panic occurred in late 1930; the second in the spring of 1931, and the third in March 1933. When it was over, 10,000 banks had gone out of business, with well over $2 billion in deposits lost.
WHAT ROLE DID THE FED PLAY IN CAUSING THE GREAT DEPRESSION


lol

Friedman and Ben Bernanke disagree.

The next episode studied by Friedman and Schwartz, another tightening, occurred in September 1931, following the sterling crisis. In that month, a wave of speculative attacks on the pound forced Great Britain to leave the gold standard. Anticipating that the United States might be the next to leave gold, speculators turned their attention from the pound to the dollar. Central banks and private investors converted a substantial quantity of dollar assets to gold in September and October of 1931. The resulting outflow of gold reserves (an "external drain") also put pressure on the U.S. banking system (an "internal drain"), as foreigners liquidated dollar deposits and domestic depositors withdrew cash in anticipation of additional bank failures. Conventional and long-established central banking practice would have mandated responses to both the external and internal drains, but the Federal Reserve--by this point having forsworn any responsibility for the U.S. banking system, as I will discuss later--decided to respond only to the external drain. As Friedman and Schwarz wrote, "The Federal Reserve System reacted vigorously and promptly to the external drain. . . . On October 9 [1931], the Reserve Bank of New York raised its rediscount rate to 2-1/2 per cent, and on October 16, to 3-1/2 per cent--the sharpest rise within so brief a period in the whole history of the System, before or since (p. 317)." This action stemmed the outflow of gold but contributed to what Friedman and Schwartz called a "spectacular" increase in bank failures and bank runs, with 522 commercial banks closing their doors in October alone. The policy tightening and the ongoing collapse of the banking system caused the money supply to fall precipitously, and the declines in output and prices became even more virulent. ...​

FRB Speech Bernanke -- On Milton Friedman s ninetieth birthday -- November 8 2002

IOW, Fed policy accelerated the bank run which decreased the money supply.

SURE they did, by NOT doing anything they did that? You mean Uncle Miltie WANTED the fed to use actions of the federal reserve? lol

Friedman and Schwartz claimed that the fall in the money supply turned what might have been an ordinary recession into a catastrophic depression, itself an arguable point. But even if we grant that point for the sake of argument, one has to ask whether the Federal Reserve, which after all did increase the monetary base, can be said to have caused the fall in the overall money supply. At least initially, Friedman and Schwartz didn't say that. What they said instead was that the Fed could have prevented the fall in the money supply, in particular by riding to the rescue of the failing banks during the crisis of 1930–1931. If the Fed had rushed to lend money to banks in trouble, the wave of bank failures might have been prevented, which in turn might have avoided both the public's decision to hold cash rather than bank deposits, and the preference of the surviving banks for stashing deposits in their vaults rather than lending the funds out. And this, in turn, might have staved off the worst of the Depression.

An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

What Friedman said - and Bernanke agreed and extrapolated upon - was that monetary policy, including the Fed increasing interest rates in 1931, turned what was otherwise a nasty recession into The Great Depression.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.​

FRB Speech Bernanke -- On Milton Friedman s ninetieth birthday -- November 8 2002

 

[Dad2three]

And yet the capitalism YOU want to practice brought US the first GOP great depression,

dumbto3 has learned 110 times that Hoover and FDR were liberals yet still blames Depression on GOP while experts agree it was caused by mistaken monetary policy. You can't be dumber
than dumbto3.

WHAT ROLE DID THE FED PLAY IN CAUSING THE GREAT DEPRESSION?

A favorite conservative argument is that the Federal Reserve Board caused the Great Depression by contracting the money supply.

This is a complete myth. According to the Federal Reserve's own records, at no time did the Fed pull money out of the system. Although it's true that the money supply contracted 31 percent between 1929 and 1933, this was not because of the Fed. Rather, the contraction was caused by three dramatic runs on banks, which would close 10,000 banks by 1933. So many failures were significant, because bank deposits formed 92 percent of all the money in circulation.


To see why the Federal Reserve did not cause this contraction, recall that the Fed has at least two methods of increasing the money supply. By far the most common and important method is buying U.S. debt from commercial banks, in the form of U.S. securities. The lesser way is to cut the prime interest rate that the Fed charges commercial banks.

Between October 1929 and February 1930, the Fed actually pumped significant money into the economy. It made major purchases of U.S. securities, and cut interest rates from 6 to 4 percent.

After this sudden infusion of money, however, the Fed made only very modest purchases of securities. It cut the discount rate only twice between March 1930 and September 1931. In the final months of 1931 it briefly raised the rate twice, but then cut it again in 1932. The modest security purchases counterbalanced the brief raises in rates and resulted in no significant change in the amount of money available to the public. However, this period of inaction by the Fed is the target of much criticism, as we shall see.

In 1932, the Fed overcame its idleness and once again made large purchases of U.S. securities.

The Run on Banks


So what caused a 31-percent contraction in the money supply? Pretty clearly, the public run on banks. The first banking panic occurred in late 1930; the second in the spring of 1931, and the third in March 1933. When it was over, 10,000 banks had gone out of business, with well over $2 billion in deposits lost.
WHAT ROLE DID THE FED PLAY IN CAUSING THE GREAT DEPRESSION


lol

Friedman and Ben Bernanke disagree.

The next episode studied by Friedman and Schwartz, another tightening, occurred in September 1931, following the sterling crisis. In that month, a wave of speculative attacks on the pound forced Great Britain to leave the gold standard. Anticipating that the United States might be the next to leave gold, speculators turned their attention from the pound to the dollar. Central banks and private investors converted a substantial quantity of dollar assets to gold in September and October of 1931. The resulting outflow of gold reserves (an "external drain") also put pressure on the U.S. banking system (an "internal drain"), as foreigners liquidated dollar deposits and domestic depositors withdrew cash in anticipation of additional bank failures. Conventional and long-established central banking practice would have mandated responses to both the external and internal drains, but the Federal Reserve--by this point having forsworn any responsibility for the U.S. banking system, as I will discuss later--decided to respond only to the external drain. As Friedman and Schwarz wrote, "The Federal Reserve System reacted vigorously and promptly to the external drain. . . . On October 9 [1931], the Reserve Bank of New York raised its rediscount rate to 2-1/2 per cent, and on October 16, to 3-1/2 per cent--the sharpest rise within so brief a period in the whole history of the System, before or since (p. 317)." This action stemmed the outflow of gold but contributed to what Friedman and Schwartz called a "spectacular" increase in bank failures and bank runs, with 522 commercial banks closing their doors in October alone. The policy tightening and the ongoing collapse of the banking system caused the money supply to fall precipitously, and the declines in output and prices became even more virulent. ...​

FRB Speech Bernanke -- On Milton Friedman s ninetieth birthday -- November 8 2002

IOW, Fed policy accelerated the bank run which decreased the money supply.

SURE they did, by NOT doing anything they did that? You mean Uncle Miltie WANTED the fed to use actions of the federal reserve? lol

Friedman and Schwartz claimed that the fall in the money supply turned what might have been an ordinary recession into a catastrophic depression, itself an arguable point. But even if we grant that point for the sake of argument, one has to ask whether the Federal Reserve, which after all did increase the monetary base, can be said to have caused the fall in the overall money supply. At least initially, Friedman and Schwartz didn't say that. What they said instead was that the Fed could have prevented the fall in the money supply, in particular by riding to the rescue of the failing banks during the crisis of 1930–1931. If the Fed had rushed to lend money to banks in trouble, the wave of bank failures might have been prevented, which in turn might have avoided both the public's decision to hold cash rather than bank deposits, and the preference of the surviving banks for stashing deposits in their vaults rather than lending the funds out. And this, in turn, might have staved off the worst of the Depression.

An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

What Friedman said - and Bernanke agreed and extrapolated upon - was that monetary policy, including the Fed increasing interest rates in 1931, turned what was otherwise a nasty recession into The Great Depression.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.​

FRB Speech Bernanke -- On Milton Friedman s ninetieth birthday -- November 8 2002

Wait, you mean 'free market' conservative Bernake, the guy who backstopped the Banksterss after Dubya allowed them crashed the worlds economy, agreed the BIG, BAD GOV'T SHOULD'VE STEPPED UP AND DONE MORE AFTER THE BANKSTERS DID IT IN THE 1920'S??? LOL


Hell, as long as Berneke, a Uncle Miltie disciple agrees, it MUST be true, don't let things like LOGIC OR HONESTY stop your beliefs, they generally don't, like YOUR posit Gov't policy created Dubya's allowing the Banksters to create a WORLD WIDE CREDIT BUBBLE AND BUST,. LOL



YES, MORE ACTION BY BIG, BAD GOV'T WOULD'VE FIXED THE GOP'S GREAT DEPRESSION, THAT'S UNCLE MILTIES POSIT, LOL




A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

BIG BAD GOV'T IS ALWAYS THE PROBLEM IN RIGHT WING WORLD, EITHER TO MUCH ACTION, OR TO LITTLE, LOL

 

[Toro]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

 

[EdwardBaiamonte]

BIG BAD GOV'T IS ALWAYS THE PROBLEM IN RIGHT WING WORLD, EITHER TO MUCH ACTION, OR TO LITTLE, LOL

dear, Republicans are not anarchists and neither are Democrats so how much govt is always the issue, if fact the issue of world history. Does the perfect liberal idiot understand now?

 

[EdwardBaiamonte]

LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???

dear if they always wanted less action by govt they would be anarchists. Did you know that conservatives are not anarchists?

See how we have to talk to you as if you are a little child??

 

[EdwardBaiamonte]

So what caused a 31-percent contraction in the money supply? Pretty clearly, the public run on banks.

which is true enough and today the govt through FDIC and others prevents runs.

Does the liberal illiterate dumbto3 understand now?

 

[EdwardBaiamonte]

. Does the GOP still nominate liberals like Hoover?

sure it soon may nominate Bush or Romney. Any more questions like does 1+1=2?

 

[Dad2three]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

FROM THE LINK ABOVE THAT, WHERE YOU WINGNUTTERS IGNORE:


"To most observers, it appeared that there was little demand for credit"


THANKS FOR NOT DISAGREEING, ANTI GOV'T NUTTJOB UNCLE MILTIE BLAMED GOV'T FOR FREE MARKETS EXORBITANCE! LOL

 

[Dad2three]

So what caused a 31-percent contraction in the money supply? Pretty clearly, the public run on banks.

which is true enough and today the govt through FDIC and others prevents runs.

Does the liberal illiterate dumbto3 understand now?

YOU DAMN COMMIE, WANTING GOV'T AND THER REGULATIONS TO BACKSTOP THE BANKSTERS. That sounds like a Soviet idea. You love Stalin? lol

 

[Dad2three]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

ONCE MORE:

"An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

 

[EdwardBaiamonte]

YOU DAMN COMMIE, WANTING GOV'T AND THER REGULATIONS TO BACKSTOP THE BANKSTERS. That sounds like a Soviet idea. You love Stalin? lol

dear, conservatives are not anarchists. Do you understand??

notice the way you have to be talked to as if you were a tiny child?

 

[EdwardBaiamonte]

But it would be quite a stretch to say that the government caused the epidemic,

dear, the govt controls the money supply. If it lets the supply drop 30% it causes a depression;if it lets it increase by 30% it causes huge inflation.

Feel silly yet,liberal?

 

[Toro]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

ONCE MORE:

"An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

Derp2Three

Here's another analogy. Your house is on fire, and the fire department arrives. But instead of dousing your house with water, they douse it with gasoline, and the rest of the houses on the block, causing the fire to get much worse. That's Friedman's argument.

But I'm sure you don't understand that.

Since you are a partisan hack incapable of constructing an argument on your own, do what you always do, and run off to find some liberal post to cut and paste as a response.

 

[EdwardBaiamonte]

Since you are a partisan hack incapable of constructing an argument on your own, do what you always do, and run off to find some liberal post to cut and paste as a response.

at least he uses big and bold letters so we won't miss the important parts!! Sometimes he even uses colors and sometimes there is his special treat: cartoons.

 

[Dad2three]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

ONCE MORE:

"An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

Derp2Three

Here's another analogy. Your house is on fire, and the fire department arrives. But instead of dousing your house with water, they douse it with gasoline, and the rest of the houses on the block, causing the fire to get much worse. That's Friedman's argument.

But I'm sure you don't understand that.

Since you are a partisan hack incapable of constructing an argument on your own, do what you always do, and run off to find some liberal post to cut and paste as a response.

Got it Bubba, ANTI Gov't Uncle Miltie is upset BIG GOV'T did fix the CONSERVATIVES big bubble, BY GOV'T INTRUDING MORE. Is that about right?


BTW, High interests rates? lol

"What Friedman said - and Bernanke agreed and extrapolated upon - was that monetary policy, including the Fed increasing interest rates in 1931, turned what was otherwise a nasty recession into The Great Depression."



1930 - December: The Federal Reserve's federal funds rate reaches 2%, a record low.

1931 - May: The Federal Reserve's federal funds rate bottoms out at 1.5%.
September - December: The Federal Reserve increases the federal funds rate.

According to Uncle Miltie, and apparently YOU who was so wrong on Dubya's great recession, the problem was BIG GOV'T'Ss failure to intervene, failure to monetize the debt, failure to print MORE money, and failure to forbid bank runs? Is that about it? lol


Fukking wingnutters!

 

[Toro]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

ONCE MORE:

"An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

Derp2Three

Here's another analogy. Your house is on fire, and the fire department arrives. But instead of dousing your house with water, they douse it with gasoline, and the rest of the houses on the block, causing the fire to get much worse. That's Friedman's argument.

But I'm sure you don't understand that.

Since you are a partisan hack incapable of constructing an argument on your own, do what you always do, and run off to find some liberal post to cut and paste as a response.

Got it Bubba, ANTI Gov't Uncle Miltie is upset BIG GOV'T did fix the CONSERVATIVES big bubble, BY GOV'T INTRUDING MORE. Is that about right?


BTW, High interests rates? lol

"What Friedman said - and Bernanke agreed and extrapolated upon - was that monetary policy, including the Fed increasing interest rates in 1931, turned what was otherwise a nasty recession into The Great Depression."



1930 - December: The Federal Reserve's federal funds rate reaches 2%, a record low.

1931 - May: The Federal Reserve's federal funds rate bottoms out at 1.5%.
September - December: The Federal Reserve increases the federal funds rate.

According to Uncle Miltie, and apparently YOU who was so wrong on Dubya's great recession, the problem was BIG GOV'T'Ss failure to intervene, failure to monetize the debt, failure to print MORE money, and failure to forbid bank runs? Is that about it? lol


Fukking wingnutters!

Derp2Three

Being the intellectually limited partisan hack that you are, I understand that you are unable to think outside of anything other than an ideological box and unable to frame an argument. That is why you frame every single post as an Epic Ideological Struggle, cheerleading government intervention at all-times, no matter what. So run back to your liberal masters and tell them that you won the Internets today. Tell them how many of your bookmarked ideologically-biased links you used. I'm sure they will be happy with you.

From 1929 to 1931, the Fed cut interest rates because the economy was in deflation. That was the proper response. In 1931, the Fed increased interest rates from 1.5% to 3.5% to stem the outflow of gold from the country. That was not the proper response. When that happened, banking failures accelerated because the cost of credit rose. Now, I know that you really don't understand how this works because it isn't mentioned in your liberal websites that you only traffic, but credit was tight, not loose. With deflation at -10%, the real rate of interest went from +11.5% to +13.5% during a fierce recession. Of course, that's insane. The Fed should have cut to zero. What Friedman argues is that the Fed should have continued to lower interest rates, including buying securities if needed.

This is why, today, the Fed doesn't raise interest rates in a recession. This is why the Fed engage in quantitative easing during the past recession. They recognized the mistake made during the Great Depression.

Because you're an obnoxious partisan hack, I'll frame it in a way that you can relate. But I doubt you'll understand, because, well, you're a moron.

The argument Friedman makes isn't that there should be no government intervention in central banking. The argument he made is that government did it wrong. Therefore, the government caused the Great Depression.

The argument that conservatives make is that this is an example of government screwing up because government is expected to screw up.

I don't buy the latter argument, which probably confuses you greatly, since you're unable to comprehend anything outside of your two-dimensional ideological world.

 

[Camp]

This economics discussion is very interesting. Perhaps someone can explain how FDR influenced these events and policies that were occurring years before he became President? Maybe the discussion is focused on how the mess FDR was handed came about?

 

[Toro]

This economics discussion is very interesting. Perhaps someone can explain how FDR influenced these events and policies that were occurring years before he became President? Maybe the discussion is focused on how the mess FDR was handed came about?

He didn't.

There is a valid argument that some of his policies caused the recovery to be less than it otherwise would have been, such as NIRA. However, some of his policies certainly helped, such as devaluing the dollar to gold and creating the FDIC.

 

[Dad2three]

A fundamental disagreement within the Federal Reserve System and among outside observers, even today, is whether monetary policy during the Depression was easy or tight. Most Fed officials felt that money and credit were plentiful.

Short-term market interest rates fell sharply after the stock market crash of 1929 and remained at extremely low levels throughout the 1930s

(see figure 5).


‘to most observers, the decline in short-term rates implied monetary ease. Long-term interest rates declined less sharply, however, and yields on risky bonds, such as Baa-rated bonds, rose during the first three years of the Depression

(see figure 5)


Never the less, the exceptionally low yields on short term securities has suggested to many observers an abundance of liquidity.


Other variables also have been interpreted as indications of easy monetary conditions.
Relatively few banks came to the Fed’s discount window to borrow reserves, for example, and many banks built up substantial excess reserves as the Depression
progressed

(see figure8)

To most observers, it appeared that there was little demand for credit and, since most policymakers saw their mission as one of accommodating credit demand, few believed that more vigorous expansionary actions were necessary.”


Low interest rates and an apparent lack of demand for reserves have led many researchers to conclude that tight money did not cause the Depression

https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf

Well, if you wanted to be "honest," you would have posted the next few paragraphs

Other indicators of monetary conditions, however, suggest the opposite conclusion. Deflation implied that the value of the dollar rose 25 percent from 1929 to 1933, which Schwartz (1981) argues reflected exceptionally tight money. Another indicator, the money stock, fell by one-third from 1929 to 1933 (see figure 7)13 Friedman and Schwartz contend that:

it seems paradoxical to describe as ‘monetary ease’ a policy which permitted the stock of money to decline. - - by a percentage exceeded only four times in the preceding fifty-four years and then only during extremely severe business-cycle contractions (p. 37a).​

And finally, numerous studies point out that the real interest rate, that is, the interest rate adjusted for changes in the price level, rose sharply during the Depression (see figure 8).” While the nominal yield on short-term government securities fell to an exceptionally low level, deflation implied that their real yield rose above 10 percent in 1930 and 1931. Thus, in contrast to the apparent signal given by nominal interest rates, member bank borrowing and excess reserves, the falling money stock and deflation and then only during extremely severe suggest that monetary conditions were far from easy.”​

ONCE MORE:

"An analogy may be helpful here. Suppose that a flu epidemic breaks out, and later analysis suggests that appropriate action by the Centers for Disease Control could have contained the epidemic. It would be fair to blame government officials for failing to take appropriate action. But it would be quite a stretch to say that the government caused the epidemic, or to use the CDC's failure as a demonstration of the superiority of free markets over big government.

Yet many economists, and even more lay readers, have taken Friedman and Schwartz's account to mean that the Federal Reserve actually caused the Great Depression—that the Depression is in some sense a demonstration of the evils of an excessively interventionist government. And in later years, as I've said, Friedman's assertions grew cruder, as if to feed this misperception.



..By 1976 Friedman was telling readers of Newsweek that "the elementary truth is that the Great Depression was produced by government mismanagement,"


LOL, THEY WANTED MORE ACTION BY GOV'T? SERIOUSLY???



Economist s View Monetary Policy and the Great Depression

Derp2Three

Here's another analogy. Your house is on fire, and the fire department arrives. But instead of dousing your house with water, they douse it with gasoline, and the rest of the houses on the block, causing the fire to get much worse. That's Friedman's argument.

But I'm sure you don't understand that.

Since you are a partisan hack incapable of constructing an argument on your own, do what you always do, and run off to find some liberal post to cut and paste as a response.

Got it Bubba, ANTI Gov't Uncle Miltie is upset BIG GOV'T did fix the CONSERVATIVES big bubble, BY GOV'T INTRUDING MORE. Is that about right?


BTW, High interests rates? lol

"What Friedman said - and Bernanke agreed and extrapolated upon - was that monetary policy, including the Fed increasing interest rates in 1931, turned what was otherwise a nasty recession into The Great Depression."



1930 - December: The Federal Reserve's federal funds rate reaches 2%, a record low.

1931 - May: The Federal Reserve's federal funds rate bottoms out at 1.5%.
September - December: The Federal Reserve increases the federal funds rate.

According to Uncle Miltie, and apparently YOU who was so wrong on Dubya's great recession, the problem was BIG GOV'T'Ss failure to intervene, failure to monetize the debt, failure to print MORE money, and failure to forbid bank runs? Is that about it? lol


Fukking wingnutters!

Derp2Three

Being the intellectually limited partisan hack that you are, I understand that you are unable to think outside of anything other than an ideological box and unable to frame an argument. That is why you frame every single post as an Epic Ideological Struggle, cheerleading government intervention at all-times, no matter what. So run back to your liberal masters and tell them that you won the Internets today. Tell them how many of your bookmarked ideologically-biased links you used. I'm sure they will be happy with you.

From 1929 to 1931, the Fed cut interest rates because the economy was in deflation. That was the proper response. In 1931, the Fed increased interest rates from 1.5% to 3.5% to stem the outflow of gold from the country. That was not the proper response. When that happened, banking failures accelerated because the cost of credit rose. Now, I know that you really don't understand how this works because it isn't mentioned in your liberal websites that you only traffic, but credit was tight, not loose. With deflation at -10%, the real rate of interest went from +11.5% to +13.5% during a fierce recession. Of course, that's insane. The Fed should have cut to zero. What Friedman argues is that the Fed should have continued to lower interest rates, including buying securities if needed.

This is why, today, the Fed doesn't raise interest rates in a recession. This is why the Fed engage in quantitative easing during the past recession. They recognized the mistake made during the Great Depression.

Because you're an obnoxious partisan hack, I'll frame it in a way that you can relate. But I doubt you'll understand, because, well, you're a moron.

The argument Friedman makes isn't that there should be no government intervention in central banking. The argument he made is that government did it wrong. Therefore, the government caused the Great Depression.

The argument that conservatives make is that this is an example of government screwing up because government is expected to screw up.

I don't buy the latter argument, which probably confuses you greatly, since you're unable to comprehend anything outside of your two-dimensional ideological world.

Got it Bubba, you're the hack that premised the Banksters WORLD WIDE CREDIT BUBBLE WAS THE RESULT OF GOV'T (F/F) POLICY, AND NOW YOUR POSIT, UNCLE MILTIES, IS AFTER THE FEDERAL RESERVE TOOK US TO RECORD LOW INTEREST RATES, 1.5% (1% LOWER THAN PREVIOUS LOWS, BIG BAD GOV'T INTERVENTION TO TAKE THEM BACK TO 3.5%? THAT CAUSED THE DEPRESSION?

Not the abundance of credit pre 1931 (1920's, 1929 crash of market, 1925-1927 housing bubble in NY, Cali, Florida), fall in asset prices, HUGE reduction in output, or a loss of confidence

NO IT WAS ANTI GOV'T BUT JOBBER UNCLE MILTIES POSIT THAT TAKING US BACK TO MORE REALISTIC MONETARY POLICY OFF THE RECORD LOWS, THAT WAS WHAT DID IT? LOL



Tell me again how Fannie/Freddie caused Dubya's great recession? lol


NOW you're telling me Chi guys SUPPORT QE? LOL



"Probably never before in this country had such a volume of funds been available at such low rates for such a long period" Harry Jerome (1934). Mechanization in Industry, National Bureau of Economic Research.

 

[Dad2three]

This economics discussion is very interesting. Perhaps someone can explain how FDR influenced these events and policies that were occurring years before he became President? Maybe the discussion is focused on how the mess FDR was handed came about?

All right wingers have are 'what if's, just like their posits are Obama's policies didn't fix Dubya's great recession fast enough, AFTER they ignore WHY Obama had to fix anything

Typical right wingers NEVER can support their past policies!