Paper Summary:

The paper discusses the four key events that the Federal Reserve had to confront during the Great Depression: the Stock Market collapse, the failure of the banks, Britain's abandonment of the gold standard and the Federal Reserve's large scale open-market purchases. The paper looks at Milton Friedman and Anna Schwartz's account "The Great Contraction," that contends that the Federal Reserve failed to expand the money stock in the face of the Depression and in doing so aggravated the situation. The paper also discusses how some of the failure of the Federal Reserve can be blamed on the radical changes in the American economy and its government brought about by the Depression. Finally, the paper looks at a defense of the Federal Reserve's actions.

From the Paper:

"During the period 1929 through 1932, the Federal Reserve confronted a series of economic crisis, and an assessment of its actions during this period turns on the interpretation given to its responses to these crises. In the fall of 1929, the Stock Market plummeted. In the fall of 1930, banks throughout the nation failed, climaxing in the collapse of the Bank of the United States. In the fall of 1931, Britain abandoned the gold standard. In April 1932, the Federal Reserve undertook large scale open-market purchases."

Sample of Sources Used:

• Allen, Frederick Lewis. Only Yesterday: An Informal History of the Nineteen-twenties. New York, New York: Harper & Row, 1959.
• Arkes, Hadley. The Return of George Sutherland: Restoring a Jurisprudence of Natural Rights. Princeton, New Jersey: Princeton University Press, 1994.
• Bordo, Michael D., Choudhri, Ehsan U., & Schwartz, Anna J.."Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint." Explorations in Economic History. 39(1): 1-28 (Jan.2002).
• Chandler, Lester Vernon, America's Greatest Depression, 1929-1941. New York, New York: Harper & Row, 1970.
• Chang-Tai Hsieh, & Romer, Christina D.. "Was the Federal Reserve Constrained by the Gold Standard During the Great Depression? Evidence from the 1932 Open Market Purchase Program." Journal of Economic History. 66(1); 140-76 (Mar. 2006).

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