1. Great Contraction 1929-1333 Keys Ideas/Topics/Issues (F&S 7-7.5)
%ΔM, %Δv, %ΔP, %Δy
Closer look at velocity
Importance of HPM, D/C, D/R => %ΔM
Importance of Great Contraction
Timeline of key events ( )
Why existence of Fed prevented 1907-type solution
Closer look at bank failures
Why were they important?
Why did they happen?
Why was Fed relatively unconcerned?

2. Great Contraction 1929-1333 Time Line of Key Events:
Fed “tightens” money to fight stock-market speculation –
FRB-NY raises discount rate from 3.5% to 5% in early 1928.
Fed securities holdings drop from over $600 to $210 million (year-end 1927 to August 1929).
FRB-NY raises discount rate from 5% to 6% in August 1929.
Result: Money stock declines slightly from April 1928 to August (only other 16-month declines are and ).
Stock Market Crash – October 1929

3. Great Contraction 1929-1333 Time Line of Key Events:
First Banking Crisis – October 1930
Second Banking Crisis – March 1931
Britain’s Departure from Gold – September 1931
Large-Scale Open-Market Purchases – April 1932
Banking Panic of 1933

4. Great Contraction

5. Great Contraction

6. Great Contraction

7. Great Contraction

8. Great Contraction