The Great Depression and Monetary Policy

The Stock Market Crash

It is a well known fact that the economy was booming in the 1920s. There was a high level of optimism that made economists believe that the United States Federal Reserve would be able to stabilize its economy. The Federal Reserve worried about extremely high and unstable level of the stock market, “It seemed better to the Federal Reserve in 1928 and 1929 to try to “cool off” the market by making borrowing money for stock speculation difficult and costly by raising interest rates. They accepted the risk that the increase in interest rates might bring on the recession that they hoped could be avoided if the market could be “cooled off”: all policy options seemed to have possible unfavorable consequences.” (http://econ161.berkeley.edu/TCEH/Slouch_Crash14.html) Sure enough on October 24 1929, also known as “Black Thursday,” a record of 12,894,650 shares were traded. Only five days later another catastrophic downturn of 16,410,000 shares were bought and sold.

---

The Great Depression and Monetary Policy

• Causes of the Great Depression
• The Stock Market Crash
• Effect on the American People
• Monetary Policy
• Roosevelt and the New Deal