Federal Reserve Policy in the Great Depression



Students of U.S. economic history agree that Americans living during 1929 to 1933 experienced the biggest economic catastrophe in the history of the nation. The terror visited upon families by the disaster cannot be expressed in numbers. However, an impression of the severity of the Great Depression can be gained by examining a handful of pertinent facts. From the fall of 1929 to the spring of 1933, the nation’s nominal gross domestic product (GDP) fell nearly 50 percent. Real GDP declined by 29 percent and industrial production fell in half. This relative decline in real GDP was more than six times the magnitude of the contraction experienced during the Great Recession of 2007–2009, the most severe U.S. downturn since the Great Depression. Table 10–1 indicates some of the salient indicators of macro-economic conditions in the United States from 1928 to 1938.


Interest Rate Monetary Policy Central Bank Federal Reserve Money Supply 
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  1. 3.
    A detailed account of the nonmonetary forces alleged to be the main cause of the depression can be found in Peter Temin, Did Monetary Forces Cause the Great Depression? (New York: Norton, 1976).Google Scholar
  2. 6.
    For a fascinating account of the first 100 days of Roosevelt’s presidency, see Jonathan Alter, The Defining Moment (New York: Simon and Schuster Paperbacks, 2006). Things were so dire in the early months of 1933 that serious discussion of proposals to grant Roosevelt dictatorial powers to implement measures to lift the nation out of depression surfaced. Roosevelt resisted such proposals, but was highly successful in getting unprecedented legislation aimed at boosting employment through a compliant Congress in his first few months in office.Google Scholar

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© Lloyd B. Thomas 2013

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