Did the Federal Reserve bank cause the Great Depression?

Question

Did the Federal Reserve bank cause the Great Depression?

Answer 1

No. However, similar to the subprime crisis today, there is some culpability.

There is also foundation for saying that the depression could have been shorter and less severe had the Federal Reserve had a different structure and mission.

To elaborate:

The 1920s created a huge bubble in the stock market that expanded to include the middle class. The stock market was considered such a 'sure thing' that borrowing to invest in it became a norm. The naysayers of that strategy (including Hoover) were eventually silenced by the year-after-year success of the market.

Of course, it was not sustainable. And when the bubble burst it affected consumers, businesses, and especially lending institutions. The house of cards fell and the subsequent lack of confidence in the economy made everyone hesitent to rebuild.

The Federal Reserve was originally organized under a laissez-faire doctrine to increase the money supply as the economy demanded it. Unfortunately such a doctrine fueled, rather than tempered, the boom times.

Further problems with the Federal Reserve charter became evident afterwards in trying to deal with the problems. The 12 Federal Branches originally had a fair amount of autonomy and, in these dire times, often argued about the appropriate response. There were those that wanted to pump up the economy and those branches that were confident that the economy would just bounce back on it's own.

But eventually the Federal Reserve did respond with increased money (probably too late) but soon hit their legal limit. At the time the dollar had a minimum % gold backing. The sudden halting of money supply increases (as well as an increase in the reserve requirement in a futile attempt to deal with this limit). To address this, the government confiscated as much gold as it could (reimbursed of course) so more money was created (eventually the gold standard was abandoned).

The Bank Act of 1935 fundamentally reorganized the Federal Reserve both in structure and charter. For the first time, monetary policy was centralized with a government agency (The Board of Governors), and the mission was changed from a laissez-faire orientation, to actively monitoring and stimulating the economy.

In any crisis, there is intended to look for a single villian. More often than not, it is the culmination of many events and decisions, often dominated by ignorance and luck (good and bad).

Answer 2

ABSOLUTLY!!!!

Yes the Federal Reserve was enacted by Congress in 1912, so it was in full swing by the 1930s.  They print money out of thin air.  This is what causes all the inflation, that causes all the booms and busts of an economy.

Answer 3

There was not federal reserve when we had the great depression.  It was formed in response to the great deprtession as one tool to help prevent another great depression

Answer 4

Yes and no.  It is unlikely the any single entity caused the Great Depression.  Remember there were issues such as debt, trade, and wealth inequality.  The Federal Reserve may not have caused the Great Depression, but their constriction of the money supply during the initial stages of the Depression clearly protracted the recovery.

Answer 5

No.

After WWI, in the 1920s America was following the policy of isolationism with the Republicans in power. This meant all foreign imports were taxed so they were expensive and the government wanted people to buy American goods. They also did get involved in international affairs.

The American economy was booming, most city people were getting richer, profits were higher and share prices were rising. However, the American goods market becoming saturated so companies went overseas to sell goods to Japan, Britain and France. However Japan, Britain and France were in financial debt to the USA so could not afford to buy goods.

Americans could not buy any more goods either because they had spent all their cash.

Subsequently share prices dropped slightly and all the stupid bankers in Wall Street thought a crash would follow but their stupidity caused the crash itself.

If the stock market traders in Wall Street looked rationally at the markets they would realize the markets would remain stable but they panicked and sold the shares and caused a domino effect which resulted in everyone selling shares.

So STUPID Americans caused the crash. Because of this world trade slowed (Great Depression starts), Japan suffered as did Britain.

Before the crash America loaned money to Germany but then withdrew it because America needed it.

German people then became poor, and needed work. Hitler promised this so he was voted in. Hitler teamed up with Japan and Italy and started World War Two.

So if STUPID Americans had not caused the Wall Street Crash and subsequent  Great Depression. Hitler would not have been elected and World War Two would never had happened.

So all the people who died in World War Two - it was America's fault blame them.

Now Americans start saying that they saved our butts in World War Two and that people should be thanking them but it was their duty to help Europe  -  because they kicked Europe and Japan in the butt. Hypocrites!!

Thumbs down me if you want but the

TRUTH hurts doesn't it ?

Answer 6

yes, established in December 1913. we have been scammed for so long.