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How the Fed Shrank the Money Supply and Made the Depression
Audio is available on Spreaker — see link below.
The 1929 stock market crash didn't cause the Great Depression — the Federal Reserve did, by contracting the money supply 31% over four years. This episode follows the banking panics, the liquidationist philosophy, and the human catastrophe that followed from Washington's fatal choices.
Audio is available on Spreaker — see link below.
The Federal Reserve made a choice in the years between nineteen twenty-nine and nineteen thirty-three. It chose to shrink the money supply.
To understand the Federal Reserve's role, you have to understand what it was supposed to do. The Fed was created in nineteen thirteen precisely to prevent banking panics.
The Fed didn't set out to destroy the economy. The men running it believed they were operating by sound principles.
Here's something that gets lost when people talk about the Depression in broad terms. Ninety-two percent of the money supply wasn't cash.
Numbers only carry so far. Twenty-five percent unemployment by nineteen thirty-three.
In the middle of all this, the land itself turned on the people trying to work it. The Dust Bowl was an ecological catastrophe decades in the making.
Franklin Roosevelt won the nineteen thirty-two election by an enormous margin, and he won it on the promise of action. He wasn't entirely specific about what that action would look like.
Two specific reforms deserve attention because they directly addressed what the nineteen twenties had allowed. Glass-Steagall, passed in nineteen thirty-three, drew a hard line between commercial banking and investment banking.
The stock market didn't recover to its nineteen twenty-nine peak until nineteen fifty-four. Twenty-five years.
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