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Federal Reserve's Role in the Great Depression

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Federal Reserve's Role in the Great Depression
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The Federal Reserve’s Role in Causing the Great Depression
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Daniel Weber
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Dr. Fadhel Kaboub
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Fall 2010
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The Federal Reserve was created in 1913 in response to several financial panics, including a particularly severe one in 1907, to serve as the central bank of the United States, and given the authority to issue legal tender. According to its founding documentation, it is enlisted with the duties of conducting the nation’s monetary policy, regulating the nation’s banking industry, and preserving the stability of the financial system. Despite the apparent prosperity during the 1920’s, there were many warning signs that the burgeoning economy was not as strong as it appeared. After the stock market crash of 1929, the Federal Reserve did little to rectify the situation, adhering to a policy of sound finance, due both to their structure and their belief of how the economy functioned. With banks failing across the country, the Federal Reserve chose not to bail them out, allowing them to go bankrupt and the public to lose faith in the strength of the economy. Today, many, including Milton Friedman, Ben Bernanke, and Anna Schwartz, blame the Federal Reserve, not for causing the Great Depression,


Bibliography: Bernanke, Ben. Essays on the Great Depression. Princeton, NJ: Princeton UP, 2000. Print. "Bernanke: Federal Reserve Caused Great Depression." A Free Press for a Free People. Web. 21 Sept. 2010. <http://www.wnd.com/?pageId=59405>. Bordo, Michael. “Sound Money and Sound Financial Policy” Journal of Financial Services Research. 18:2/3 (2000): 129-155. Kangas, Steve. "The Great Depression: Its Causes and Cure," Liberalism Resurgent, 1997. Lerner, Abba P., Economics of Employment, McGraw Hill (1951) ------------------------------------------------- Romer, Christine. “Great Depression” Encyclopedia Britannica. 2003 ed. Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993. Chapel Hill: University of North Carolina, 1997. ------------------------------------------------- [ 1 ]. ------------------------------------------------- Samuelson, 2002 [ 2 ]. ------------------------------------------------- Kangas, 1997 [ 3 ]. ------------------------------------------------- Samuelson, 2002 [ 4 ]. ------------------------------------------------- Kangas, 1997 [ 5 ]. ------------------------------------------------- Kangas, 1997 [ 6 ]. ------------------------------------------------- Friedman and Schwartz, 1971 [ 7 ]. ------------------------------------------------- Romer, 2003 [ 8 ]. ------------------------------------------------- Romer, 2003 [ 9 ]. ------------------------------------------------- Bernanke, 2004 [ 10 ]. ------------------------------------------------- Romer, 2003 [ 11 ]. ------------------------------------------------- Romer, 2003 [ 12 ]. ------------------------------------------------- Friedman and Schwartz, 1971, p [ 13 ]. ------------------------------------------------- Bernanke, 2004 [ 14 ]. ------------------------------------------------- Meltzer, 2004, p [ 15 ]. ------------------------------------------------- Choudhri and Kochin, 2000, p
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