DOCSLIB.ORG

Happy Birthday, Federal Reserve” ■ Discussion Questions: the Federal Reserve from 1913 to Today ■ Post Reprint: Robert J

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Happy Birthday, Federal Reserve” ■ Discussion Questions: the Federal Reserve from 1913 to Today ■ Post Reprint: Robert J VOLUME 13, ISSUE 5 An Integrated Curriculum For The Washington Post Newspaper In Education Program The Fed ■ Post Reprint: “Happy Birthday, Federal Reserve” ■ Discussion Questions: The Federal Reserve From 1913 to Today ■ Post Reprint: Robert J. Samuelson | “The Fed at 100” February 10, 2014 ©2014 THE WASHINGTON POST VOLUME 13, ISSUE 5 An Integrated Curriculum For The Washington Post Newspaper In Education Program Happy Birthday, Federal Reserve How the world’s most powerful central bank was created BY NEIL IRWIN • Originally Published on Dec. 22, 2013 A century ago this week, Congress passed the Federal Reserve Act, creating a central bank for a nation that was only beginning its economic ascendance. This is the story of how it came to be, from a nearly catastrophic financial panic to secret meetings of plutocrats on the Georgia coast to the pitched battle in the halls of Congress, excerpted from The Alchemists: Three Central Bankers and a World on Fire. The mustachioed man in the silk top hat strode to his private railcar parked at a New Jersey train station, a mahogany-paneled affair with velvet drapes and well-polished brass accents. Five more men — and a legion of porters and servants — soon joined him. They referred CLOCKWISE FROM TOP LEFT: REUTERS FILE PHOTO, CORBIS, to one another by their first names HARRIS AND EWING COLLECTION/LIBRARY OF CONGRESS, LIBRARY OF CONGRESS only, an uncommon informality in Collage illustration commemorating the 100th anniversary of the Federal Reserve. 1910, intended to give the staff no to look like a duck hunter, despite destination, was a private resort hints as to who the men actually having never drawn a bead on a owned by the powerful banker J.P. were, lest rumors make their way waterfowl in his life. Morgan and some friends, a refuge to the newspapers and then to the Two days later, the car deposited on the Atlantic where they could trading floors of New York and the men at the small Georgia port get away from the cold New York London. One of the men, a German town of Brunswick, where they winter. Their host — the man in the immigrant named Paul Warburg, boarded a boat for the final leg of silk top hat — was Nelson Aldrich, carried a borrowed shotgun in order their journey. Jekyll Island, their one of the most powerful senators of February 10, 2014 ©2014 THE WASHINGTON POST VOLUME 13, ISSUE 5 An Integrated Curriculum For The Washington Post Newspaper In Education Program Happy Birthday, Federal Reserve | continued the day, a lawmaker who lorded over national bank would stabilize the paper money caused more than a the nation’s financial matters. new government’s shaky credit few problems in late 19th-century For nine days, working all day and support a stronger economy America. For example, the supply and into the night, the six men — and was an absolute necessity of dollars was tied to private banks’ debated how to reform the U.S. to exercise the new republic’s holdings of government bonds. That banking and monetary systems, constitutional powers. would have been fine if the need for trying to find a way to make this But Hamilton’s proposal dollars was fixed over time. But nation just finding its footing on faced opposition, particularly one overarching lesson of financial the global stage less subject to the in the agricultural South, where history is that that’s not the case. kinds of financial collapses that lawmakers believed a central In times of financial panic, for had seemingly been conquered bank would primarily benefit the example, everybody wants cash at in Western Europe. Secrecy was mercantile North, with its large the same time (that’s what happened paramount. “Discovery,” wrote one commercial centers of Boston, in fall 2008). attendee later, “simply must not New York and Philadelphia. “What Without a central, government- happen, or else all our time and was it drove our forefathers to this backed bank able to create money effort would have been wasted. If it country?” said James “Left Eye” on demand, the American banking were to be exposed publicly that our Jackson, a fiery little congressman system wasn’t able to provide it. particular group had got together from Georgia. “Was it not the The system wasn’t elastic, meaning and written a banking bill, that bill ecclesiastical corporations and there was no way for its supply would have no chance whatever of perpetual monopolies of England of money to adjust with demand. passage by Congress. and Scotland? Shall we suffer the People would try to withdraw more For decades afterward, the most same evils to exist in this country?” money from one bank than it had powerful men in American finance Some founding fathers, including available, the bank would fail, and referred to one another as part of Thomas Jefferson and James then people from other banks would the “First Name Club.” Paul, Harry, Madison, believed that the bank withdraw their funds, creating a Frank and the others were part of was unconstitutional. vicious cycle that would lead to a small group that, in those nine By 1811, Madison was in the widespread bank failures and the days, invented the Federal Reserve White House. The Bank of the contraction of lending across the System. Their task was more than United States closed down. Until, economy. The result was economic administrative. Because the men at least, Madison realized how hard depression. It happened every few at Jekyll Island weren’t just trying it was to fight the War of 1812 years. One particularly severe panic to solve an economic problem — without a national bank to fund the in 1873 was so bad that until the they were trying to solve a political government. The Second Bank of 1930s, the 1870s were the decade problem as old as their republic. the United States was founded in known as the “Great Depression.” 1816. It lasted a little longer — until There were lesser panics in 1884, Banking’s rough beginning it crashed against the same distrust 1890 and 1893. The U.S. financial system of centralized financial authority Then came the Panic of 1907, needed remaking. The United that undermined the first. The the one that finally persuaded States had a long but less than populist Andrew Jackson managed American lawmakers to deal with illustrious history with central its demise in 1836. their country’s backward financial banking. Alexander Hamilton, the Running an economy without a system. What made the Panic of first Treasury secretary, believed a central bank empowered to issue 1907 so severe? A bunch of things February 10, 2014 ©2014 THE WASHINGTON POST VOLUME 13, ISSUE 5 An Integrated Curriculum For The Washington Post Newspaper In Education Program Happy Birthday, Federal Reserve | continued that happened to converge at once. It started with a devastating earthquake in San Francisco in 1906. Suddenly, insurers the world over needed access to dollars at the same time. In what was then still an agricultural economy, it was also a bumper year for crops, and an economic boom was under way — so companies nationwide wanted more cash than usual to invest in new ventures. In San Francisco, deposits were unavailable for weeks after the quake: Cash was locked in vaults so Library OF CONGRESS PRINTS AND PHOTOGRAPHS DIVISION hot from fires caused by broken gas Treasury Note, by Henry R. Robinson, 1837, lithograph on wove paper. The political lines that it would have burst into cartoon parodies the worthless fractional currencies or “shinplasters” issued by banks, businesses and municipalities in lieu of coin. flames had they been opened. All of that meant the demand for dollars was uncommonly high — at York, whose president was a Heinze turned to to decide what ought to a time when the supply of dollars business associate. Depositors lined be done when trouble arose. He couldn’t increase much. up by the hundreds in its ornate was not the wealthiest of the turn- This manifested itself in the Fifth Avenue headquarters, holding of-the-century business titans, but form of rising interest rates and satchels in which to stuff their cash. the bank that bore his name was withdrawals. Withdrawals begat Bank officials standing in the middle among the nation’s largest and most more withdrawals, and before long, of the room and yelling about the important, and his power extended banks around the country were on bank’s alleged solvency did nothing farther than the (vast) number of the brink of failure. to dissuade them. The failure of the dollars under his command. His Then in October 1907, the copper trust led every bank in the country imprint on the financial system miner turned banker F. Augustus to hoard its cash, unwilling to lend has long survived him. Two of the Heinze and his stockbroker brother it even to other banks for fear that most important financial firms in Otto tried to take over the market of the borrower could be the next America today, JPMorgan Chase his own United Copper company by Knickerbocker. and Morgan Stanley, trace their buying up its shares. When he failed, lineage to John Pierpont Morgan. the price of United Copper stock The power of J. P. Morgan When the 1907 crisis rolled tumbled. Investors rushed to pull It is true that the United States, around, Morgan held court at his their deposits out of any bank even in that fearful fall of 1907, didn’t bank’s offices at 23 Wall St. while remotely related to the disgraced F. have a central bank. That doesn’t a series of bankers came to make Augustus Heinze.
Load more

Recommended publications
  • Public Debt, High Inflation and Economic Depression: a Survival Analysis Approach Minjie Guo
    CORE Metadata, citation and similar papers at core.ac.uk Provided by Scholar Commons - Institutional Repository of the University of South Carolina University of South Carolina Scholar Commons Theses and Dissertations Spring 2019 Public Debt, High Inflation and Economic Depression: A Survival Analysis Approach Minjie Guo Follow this and additional works at: https://scholarcommons.sc.edu/etd Part of the Economics Commons Recommended Citation Guo, M.(2019). Public Debt, High Inflation and Economic Depression: A Survival Analysis Approach. (Doctoral dissertation). Retrieved from https://scholarcommons.sc.edu/etd/5279 This Open Access Dissertation is brought to you by Scholar Commons. It has been accepted for inclusion in Theses and Dissertations by an authorized administrator of Scholar Commons. For more information, please contact [email protected]. Public Debt, High Inflation and Economic Depression: A Survival Analysis Approach by Minjie Guo Bachelor of Arts Fujian Agriculture and Forestry University, 2007 Master of Arts University of Texas at Arlington, 2011 Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Economics Darla Moore School of Business University of South Carolina 2019 Accepted by: John McDermott, Major Professor Janice Bass, Committee Member William Hauk, Committee Member Warren Weber, Committee Member Cheryl L. Addy, Vice Provost and Dean of the Graduate School c Copyright by Minjie Guo, 2019 All Rights Reserved. ii Dedication To my parents and grandparents. iii Acknowledgments I would like to express my sincere gratitude to Dr. John McDermott for his support during my Ph.D study. His guidance and encouragement during the dissertation process were invaluable.
    [Show full text]
  • Deflation: a Business Perspective
    Deflation: a business perspective Prepared by the Corporate Economists Advisory Group Introduction Early in 2003, ICC's Corporate Economists Advisory Group discussed the risk of deflation in some of the world's major economies, and possible consequences for business. The fear was that historically low levels of inflation and faltering economic growth could lead to deflation - a persistent decline in the general level of prices - which in turn could trigger economic depression, with widespread company and bank failures, a collapse in world trade, mass unemployment and years of shrinking economic activity. While the risk of deflation is now remote in most countries - given the increasingly unambiguous signs of global economic recovery - its potential costs are very high and would directly affect companies. This issues paper was developed to help companies better understand the phenomenon of deflation, and to give them practical guidance on possible measures to take if and when the threat of deflation turns into reality on a future occasion. What is deflation? Deflation is defined as a sustained fall in an aggregate measure of prices (such as the consumer price index). By this definition, changes in prices in one economic sector or falling prices over short periods (e.g., one or two quarters) do not qualify as deflation. Dec lining prices can be driven by an increase in supply due to technological innovation and rapid productivity gains. These supply-induced shocks are usually not problematic and can even be accompanied by robust growth, as experienced by China. A fall in prices led by a drop in demand - due to a severe economic cycle, tight economic policies or a demand-side shock - or by persistent excess capacity can be much more harmful, and is more likely to lead to persistent deflation.
    [Show full text]
  • The New Frontier: a History of Economic Crisis and Recovery from 1918 to COVID-19
    CHIEF INVESTMENT OFFICE The New Frontier: A History of Economic Crisis and Recovery from 1918 to COVID-19 June 2020 Months on from the initial outbreak, the world remains in the grip of the novel coronavirus AUTHORED BY pandemic. From shuttered storefronts to school closures and government-enforced shutdowns, the impact on daily life worldwide has been extreme, and the global economy Ehiwario Efeyini is still operating well below capacity. The scale of the crisis has been unparalleled in living Director and Senior Market memory. But a look at the past 100 years shows several periods of societal, economic, Strategy Analyst geopolitical and financial crisis that would eventually give way to new patterns of activity, innovation, policy support and cooperation that were more constructive for households, companies and investors. The early 20th century included a world war and a global flu pandemic. The 1930s saw an economic depression and military conflict on an even larger scale. The 1970s was a period of economic stagnation and high inflation. And the first decade of the new millennium brought the collapse of a stock market bubble, the rise of global terrorism and a financial crash. Crucially, each of these historical crisis periods was ultimately succeeded by an economic revival, a more favorable investment environment and sustained price gains for equity markets (Exhibit 1). Exhibit 1: Equity Markets and Historical Periods of Crisis and Recovery1 23 Dow Jones Industrial Index 9/11 2001 2008–2009 Level (log scale) Crisis Periods Recovery Periods attacks Global COVID-19 Financial Crisis 100000 pandemic 2000 1989 Dot-com peak 1974–1981 Fall of Double-digit Berlin Wall 10000 U.S.
    [Show full text]
  • The Effects on the Aggregate Demand and Aggregate Supply During the Great Economic Depression
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by UGD Academic Repository The Effects on the Aggregate Demand and Aggregate Supply during the Great Economic Depression ISSN 1857-9973 338.124.4:[338.23:336.74(100) Stevan Gaber 1, Vasilka Gaber-Naumoska 2, Aleksandar Naumoski3 1Goce Delcev University, Faculty of Economics, Krste Misirkov St., 10-A, Stip, Republic of Macedonia, e-mail: [email protected] 2Public Revenue Office, Bul. Kuzman Josifovski-Pitu No.1, Skopje 1000, Republic of Macedonia, e-mail: [email protected]; 3 Ss. Cyril and Methodius University in Skopje, Faculty of Economics, Bul. Goce Delcev 9V, Skopje 1000, Republic of Macedonia, e-mail: [email protected] Abstract The Great Depression of 1929 created significant consequences for the US economy and world economy that are detected through serious changes in output and prices. It contributed to put greater emphasis on aggregate demand and aggregate supply. Many economists agreed that in addition to monetary factors major impact on the crisis had also non-monetary factors. Numerous studies have indicated that even the gold standard played an important role in reducing output and the price level. This paper attempts to highlight key segments, such as the wrong monetary policy, the gold standard, neglected banking problems, political pressure aimed at relaxing the monetary policy as areas that have made mistakes when looking a way out of the crisis. The critics of such thesis believed that the tighter monetary policy was not strong enough to cause so far-reaching consequences and expressed serious doubts that the reduced money supply is the real cause of the collapse of the national product and price levels.
    [Show full text]
  • Economic Crisis, Whether They Have a Pattern?
    The 2nd ICVHE The 2nd International Conference on Vocational Higher Education (ICVHE) 2017 “The Importance on Advancing Vocational Education to Meet Contemporary Labor Demands” Volume 2018 Conference Paper Economic Crisis, Whether They Have a Pattern?—A Historical Review Rahmat Yuliawan Study Program of Secretary and Office Management, Faculty of Vocational Studies Airlangga University Abstract Purpose: The global economic recession appeared several times and became a dark history and tragedy for the world economy; the global economic crisis emerged at least 15 times, from the Panic of 1797, which lasted for recent years, to the depression in 1807, Panics of 1819, 1837, 1857, 1873, or the most phenomenal economic crisis known as the prolonged depression. This depression sustained for a 23-year period since 1873 to 1896. The collapse of the Vienna Stock Exchange caused the economic depression that spread throughout the world. It is very important to note that this phenomenon is inversely proportional to the incident in the United States, where at this period, the global industrial production is increasing rapidly. In the United States, for Corresponding Author: example, the production growth is over four times. Not to mention the panic in 1893, Rahmat Yuliawan Recession World War I, the Great Depression of 1929, recession in 1953, the Oil Crisis of Received: 8 June 2018 1973, Recession Beginning in 1980, reviewer in the early 1990s, recession, beginning Accepted: 17 July 2018 in 2000, and most recently, namely the Great Depression in 2008 due to several Published: 8 August 2018 factors, including rising oil prices caused rise in the price of food around the world, Publishing services provided by the credit crisis and the bankruptcy of various investor banks, rising unemployment, Knowledge E causing global inflation.
    [Show full text]
  • Checks and Balances: US Presidents and the Economy Directions
    Name __________________________ Checks and Balances: U.S. Presidents and the Economy Directions: Working in teams, match the president with the appropriate “Economic Situation,” “Government Response,” and “Primary Source Document” cards you are presented. Check your answers with the teacher. Use the “Student Handout” sheet and write a three sentence synopsis of the economic events of each of the presidents presented. George Washington Andrew Jackson Abraham Lincoln William McKinley Woodrow Wilson (1789-1797) (1829-1837) (1861-1865) (1897-1901) (1913-1921) Card: _________ Card: _________ Card: _________ Card: _________ Card: _________ Write a summary below Write a summary below Write a summary below Write a summary below Write a summary below Economic Situation Economic Situation Card: _________ Card: _________ Card: _________ Card: _________ Card: _________ Write a summary below Write a summary below Write a summary below Write a summary below Write a summary below Government Response Government Source Primary Primary CARD A Economic Situation: CARD 1 Government Response: Since the death of the Second Bank of the United States in 1836, This president was the first and only president to eliminate the the American financial system was carried out by state-chartered national debt. However, his presidency is more remembered for banks with no federal regulation. As a result, financial panics ordering the premature removal of the government’s deposits plagued the nation, leading to bank failures and business from the Second Bank of the United States in an attempt to kill it bankruptcies that severely disrupted the economy throughout the outright. He appointed a Treasury Secretary who removed and 19th century and the beginning of the 20th century.
    [Show full text]
  • Class Notes Class: IX Topic: Nazism and the Rise of Hitler
    Class Notes Class: IX Topic: Nazism and the rise of Hitler Subject: Q. 1. What was the effect of World War I on Europe? Ans. i) The war had a devastating impact on the entire continent both psychologically and financially. From a continent of creditors, Europe turned into one of the debtors. ii) The First World War left a deep imprint on European society and polity. Soldiers came to be placed above civilians. iii) Politicians and publicists laid great stress on the need for men to be aggressive, strong, and masculine. The media glorified trench life. Q.2. Who were the November criminals? Ans. The people who supported the Weimar Republic, mainly Socialists, Catholics and Democrats. They were mockingly called the ‘November criminals’. Q.3. What were the factors that led to hyper inflation in Germany? Ans. i) In 1923 Germany refused to pay the war compensation, and the French occupied its leading industrial area, Ruhr to claim their coal. ii) Germany retaliated with passive resistance and printed paper currency recklessly. With too much printed money in circulation, the value of the German mark fell. iii) As the value of the mark collapsed, prices of goods increased. The crisis came to be known as hyperinflation, a situation when prices rise phenomenally high. Q.4. How did the Great Depression originate in USA? Ans. i) Great Depression originated in USA as a result of over production in the factories. It led to closing of a few factories. ii) The Wall Street Exchange crashed in 1929. Fearing a fall in prices, people made frantic efforts to sell their shares.
    [Show full text]
  • Falling Prices and Their Impact on the Economy
    Briefing June 2015 Understanding deflation Falling prices and their impact on the economy SUMMARY The possibility of deflationary periods occurring in the world's most advanced economies is being signalled by many commentators. The effects of deflation on an economy depend on whether the deflation is caused by falls in demand or rises in productivity. The former is essentially detrimental to economic growth and may, in a worst case scenario, develop into a hard-to-break, self-reinforcing deflationary spiral, whereas the latter is believed to be conducive to economic growth. Economists remain divided over the effects of inflation and whether or not it should be mitigated at all times. Some claim that deflation always creates more problems than benefits for an economy, and as such should be actively prevented. Others argue that historical data do not show that inflation is preferable to deflation and that what influences an economy most negatively is not the deflation itself, but the significant fall in asset values (such as real estate or stocks) which often occurs first. The euro area has experienced a period of low inflation since 2013, and recently recorded successive declines in price levels. The European Commission and European Central Bank, however, predict that price levels will start to rise in 2016, while the International Monetary Fund and the OECD assess the risks of prolonged low inflation to be higher. Economists and commentators remain divided regarding the possible causes, risks, consequences and nature of this low inflation environment. Some indicate that it will create conditions favourable to economic growth, while others fear that persistent low inflation, or possible outright deflation, will be hard to mitigate and will be harmful to economic recovery in the euro area.
    [Show full text]
  • The Federal Reserve System: Overview Lesson
    U.S. HISTORY LESSON 3.3 The Federal Reserve System: Overview Lesson reform human capital debt safety net trade-off GDP deficit priorities spending Medicare mandatory budget Social Security revenue health care governance discretionary baby boomers economic growth infrastructure Because of its thematic importance, this lesson is not framed as an inquiry-driven dilemma, but instead, as a collection of resources that can be used as part of an informational lesson directed by the teacher or made available to students for independent study. INTRODUCTION Do financial markets know best? Left alone by the federal government, would the markets benefit the nation’s economy and, through self-regulation, the American people as a whole, or would they benefit a narrower group of people? Do the markets care about how well the economy is serving the American people and, if they don’t, does the government have an important role to play in achieving outcomes that benefit all Americans? One way to look at U.S. history is that it reflects the efforts of a politically open society to manage concentrations of political and economic power in ways that advance the common good with a minimum of government intervention. The story of the Federal Reserve System (also known as the Federal Reserve Bank, the Federal Reserve, or the Fed) can be told in these terms because the very need for a central bank has always been identified with the needs of private bankers—a group that has represented a concentration of economic power. The debate about Hamilton’s First Bank of the United States illustrates this struggle, and this same struggle has continued throughout U.S.
    [Show full text]
  • Financial Crisis and Economic Depression: ’Post Hoc Ego Propter Hoc’? Implications for Financial Asset Valuation and Financial Regulation
    Munich Personal RePEc Archive Financial Crisis and Economic Depression: ’Post Hoc Ego Propter Hoc’? Implications for Financial Asset Valuation and Financial Regulation. Stravelakis, Nikos National Kapodistrian University of Athens 15 March 2014 Online at https://mpra.ub.uni-muenchen.de/55944/ MPRA Paper No. 55944, posted 17 May 2014 16:03 UTC Financial Crisis and Economic Depression: “Post Hoc ergo Propter Hoc” ? Implications for Financial Asset Valuation and Financial Regulation Nikos STRAVELAKIS Department of Economics National Kapodistrian University of Athens, Greece [email protected] Abstract: It was more than four decades ago when James Tobin stressed the fallacy underlying the Latin motto "Post Hoc ergo Propter Hoc". His point was that a causal relation, back then between money and income, must rely on something more than time precedence. However, this fact has not received proper attention, contemporary literature explains the current depression from the financial crisis which preceded it and its' resolution depends on proper rules of financial regulation. This paper argues different, the current depression resulted from weak growth reflecting weak profitability. We show that under this reasoning financial crisis episodes are highly probable, serving as the trigger of depressions. The latter implies that financial assets valuation depends on a highly variable required rate of return, contrary to the postulations of modern investment theory. Highly volatile asset returns places financial markets in a world of true uncertainty as opposed to calculable risk. This shred of realism gives different meaning and limitations to financial regulation. Any regulatory policy monitoring liquidity or solvency ratios can prove insufficient as zero or weak growth turns unstable, an event usually preceded by increased amounts of speculative investments.
    [Show full text]
  • German Monetary History in the First Half of the Twentieth Century
    CORE Metadata, citation and similar papers at core.ac.uk Provided by Research Papers in Economics German Monetary History in the First Half of the Twentieth Century Robert L. Hetzel t the end of 1998, the German Bundesbank turned over the adminis- tration of monetary policy to the European Central Bank (ECB). In Athe years between World War I and 1998, the Bundesbank had come to embody the modern central bank. What history did Germany traverse to make possible the creation of such an institution? And how does that history help us define a modern central bank? Today, a central bank chooses one of two objectives. It may target either the exchange rate or domestic economic conditions, including the inflation rate. In either case, the central bank is the unique institution charged with controlling the chosen objective. Such control relies exclusively on the central bank’s management of its own balance sheet. In particular, the central bank controls its liabilities (the monetary base) through its asset acquisition.1 Conversely, a country with a modern central bank does not rely on govern- ment intervention in specific markets to achieve either price-level or exchange- rate objectives. If the central bank targets the exchange rate, the country does not rely on exchange controls, multiple exchange rates, tariffs, quotas, or other This history will be continued in a related article, to appear in a future issue of the Economic Quarterly. It will consider how Germany came to define stability of the mark in terms of its internal value (price level) rather than external value (exchange rate).
    [Show full text]
  • The Tale of Two Great Crises
    The Tale of Two Great Crises Michele Fratianni∗ Federico Giriy February 1, 2016 Abstract The great depression of 1929 and the great financial crisis of 2008 have been the two big events of the last 75 years. Not only have they produced serious economic consequences but they also changed our view of economics and policymaking. The aim of this work is to compare these two great crises and highlight similarities as well as differences. Monetary policy, the exchange rate system and the role of the banks are our fields of investigation. Our findings are that two big events have more similarities than dissimilarities. Keywords: Great Depression, Great Financial Crisis, gold standard, Eurozone, money multiplier, shadow banking. JEL classification : E5, E31, E42, G21. ∗Indiana University, Universit`aPolitecnica delle Marche and MoFiR, email:[email protected] yUniversit`aPolitecnica delle Marche, email: [email protected]. 1 I. Introduction The Great Depression of 1929-1933 (GD) and the Great Financial Crisis of 2008-2009 (GFC) have not only been colossal and worldwide events, but have challenged our \consensus" view of economics. Policymakers as well have had to learn new lessons and adopt, at times improvising, new strategies in response to events. The GD started 86 years ago and has been studied, interpreted and re-interpreted by an army of scholars. It never seems to go out of fashion. The GFC, being barely seven years old, cannot claim the pedigree of the GD nor its monumental literature. Yet, sufficient time has passed since 2008 to justify a comparative exercise, perhaps historically an early one, of the GD and GFC.
    [Show full text]