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Why do some argue that the Fed made the Great Depression worse?
Solution
The Fed was instrumental in causing the Great Depression in that it held a tight monetary policy
to an already slowing economy. Thus interest rates were kept high and the money supply was
kept low. This led to the deep recession of the time and it is said that the lack of printing of
money by the Fed meant that the recession worsened. Herbert Hoover was the president of the
time and oversaw this while the Federal Reserve chairman was Eugene Meyer who controlled
policy. They orchestrated the nature of the monetary policy at the time which worsened the
recession and so it is said they played a major role in worsening the recession.There was also
coniderable disagreement between the Fed bank governors at the time and this led to further lack
of coherence at the time. The lack of availability of money supply in the hands of the people also
worsened the Great Depression.

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Why do some argue that the Fed made the Great Depression worse S.pdf

  • 1. Why do some argue that the Fed made the Great Depression worse? Solution The Fed was instrumental in causing the Great Depression in that it held a tight monetary policy to an already slowing economy. Thus interest rates were kept high and the money supply was kept low. This led to the deep recession of the time and it is said that the lack of printing of money by the Fed meant that the recession worsened. Herbert Hoover was the president of the time and oversaw this while the Federal Reserve chairman was Eugene Meyer who controlled policy. They orchestrated the nature of the monetary policy at the time which worsened the recession and so it is said they played a major role in worsening the recession.There was also coniderable disagreement between the Fed bank governors at the time and this led to further lack of coherence at the time. The lack of availability of money supply in the hands of the people also worsened the Great Depression.