The Great Contraction, 1929-1933
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The Description for this book, The Great Contraction, 1929-1933, will be forthcoming.
was that other countries not only had to bear the whole burden of adjustment but also were faced with continued additional disturbances in the same direction, to which they had to adjust. As Harrison noted in early 1931, foreign commentators were particularly critical of the monetary policy of the United States because the gold as it came into the country has been used by member banks to repay Federal reserve credit in one form or another, with the result that in this period the total volume of
unequivocal terms the misconception of the Federal Reserve banking act which so long has been reflected in the extraordinary policies pursued by the New York bank with respect to both domestic and foreign transactions. The “extraordinary policies” referred to by Glass, who was an undeviating follower of the real bills doctrine, included the use of open market operations in government securities and the failure to restrict loans to real bills only. In his eyes, the failure was responsible for
though we have been able to find no internal document in the Goldenweiser Papers or in the Harrison Papers and no reference in the Hamlin Diary indicating that such a policy was ever seriously contemplated or its consequences for the reserve ratio explicitly considered. These documents make the rise in discount rates appear to be more nearly a conditioned reflex than a policy decision reached after full consideration of a range of feasible alternatives. 148 However, while discount rates were
not some of the liquidity come back and finance speculation in the stock market? How, in short, could the Fed stifle speculation without having any other impact on the economy? As a matter of fact, as Friedman and Schwartz point out, the 1923 report “had emphasized the impossibility of controlling the ultimate use of Reserve credit, and other reports had repeatedly noted the same point.”12 The dispute raged on as the stock market boom roared ahead. After Strong’s untimely death from tuberculosis
gold-exchange standard). Countries that adhered to the international gold standard were essentially required to maintain a fixed exchange rate with other gold-standard countries. Moreover, because the United States was the dominant economy on the gold standard during this period (with some competition from France), countries adhering to the gold standard were forced to match the contractionary monetary policies and price deflation being experienced in the United States. Importantly for