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Fri Mar 31 17:18:24 2006 |
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In reply to your message of Tue, 05 Dec 1995 13:50:34 EST |
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Anne Mayhew writes:
>b) Is it likely that the high rate of bank failures during the 1920s
>(before the autumn of 1929) played a role in the changed ratios of
>currency to deposits and of reserves to deposits?
Absolutely. If one wants to assess "blame" for the Depression, I would
indeed lay much of it on the Fed, but not only for tight monetary
policy, conventionally understood. Put simply, the Fed was created, at
least to a significant extent, to prevent *exactly* the kinds of
problems that took place from the mid-20s through the late 30s. It was
supposed to make the supply of money more elastic. It was supposed to
prevent banking run/panics/failures. It did none of those - perhaps
because it was the wrong solution to the very real problems of the
National Banking System.
Steven Horwitz
Eggleston Associate Professor of Economics
St. Lawrence University
Canton, NY 13617
TEL (315) 379-5731
FAX (315) 379-5819
EMAIL [log in to unmask]
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