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A Graph of Money in the United States, 1929-38

Gary North
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Feb. 24, 2010

This chart is from a presentation made by the Vice President of the Federal Reserve Bank of St. Louis, Dr. David Wheelock.


The monetary base did not decline, 1929-31. It rose, 1931-33.

Federal Reserve credit fell, 1930-late 1931. It rose, 1932-33. It went flat after 1934.

The money supply fell, 1930-33: the period of collapsing banks. The FDIC went into operation in 1934.

Here is the key questions:

If the Federal Reserve failed by not extending credit, 1930-31, why did its policy of extending credit also fail, 1932-33?

If it failed in not extending enough credit, 1932-33, why were there no problems after 1934, when Federal Reserve credit went strangely flat?

The money supply shot up after 1933. So did the monetary base. This was not because of increased Federal Reserve credit.

Something fundamental changed in 1934.

The FDIC went into operation in 1934. Bank runs ceased. The FDIC was the creation of Congress in 1933: the Glass-Steagall Act. The Federal Reserve did not possess this authority, nor did any politician suggest that it should.


Was the failure of the FED its policy of keeping short-term rates low, 1925-29? This was Murray Rothbard's thesis in America's Great Depression (1963).

Was the failure of the FED in not extending credit, 1930-32, and not enough credit in 1933? This was the thesis of Milton Friedman and Anna Schwartz in A Monetary History of the United States (1963).

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