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Published byMargery Booth Modified over 9 years ago
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Depression Monetary Policy Objective: Analyze the Monetary Policy of the Great Depression
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History Panic 1893 Overbuilding of Railroads Run on gold supply (populism) Banks closed Panic 1907 NYSE fell 50% Run on banks Banks closed
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The FED 1913 – Federal Reserve Act Response to Panic of 1907 Run on Banks Created a central bank to run monetary policy for US Goal maximum employment Stable prices Interest rates Make sure Banks DON’T FAIL for no reason
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Monetary Policy Savings during 20s declined Banks reckless with money invest in stocks Less money = less loans Fed allowed banks to fail Could not loan money – no gold to support loan
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Hoover’s approach Leave it alone approach Smoot-Hawley Tariff Cut taxes for rich – lead to deficit for government Then raised taxes when saw the problem Including a tax on checks (2 cents = 30 cents today)
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Hoover Asked business not to cut wages Increase government spending 1932 started to have public works projects – too late
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FDR’s Role FDR closed banks for 3 days FEDS put billions of dollars back in circulation Got rid of Gold Standard
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