Monetary Policy and the Onset of the Great Depression: The Myth of Benjamin Strong as Decisive Leader

225 Pages·2013·2.343 MB·English

by  Mark Toma (auth.)

Monetary Policy and the Onset
of the Great Depression
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Monetary Policy and the Onset
of the Great Depression
T he Myth of Benjamin Strong
as Decisive Leader
Mark Toma
MONETARY POLICY AND THE ONSET OF THE GREAT DEPRESSION
Copyright © Mark Toma, 2013.
Softcover reprint of the hardcover 1st edition 2013 978-1-137-37254-3
All rights reserved.
First published in 2013 by
PALGRAVE MACMILLAN®
in the United States— a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the world,
this is by Palgrave Macmillan, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-47615-2 ISBN 978-1-137-37162-1 (eBook)
DOI 10.1057/9781137371621
Library of Congress Cataloging-in-Publication Data is available from the
Library of Congress.
A catalogue record of the book is available from the British Library.
Design by Newgen Knowledge Works (P) Ltd., Chennai, India.
F irst edition: December 2013
10 9 8 7 6 5 4 3 2 1
To Mattie and Genia
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C ontents
List of Figures i x
List of Tables xi
Preface xiii
1 Monetary Policy as Scapegoat 1
2 Founding of the Federal Reserve System 11
3 Beyond the Founders’ Vision: Benjamin Strong as
Decisive Leader or Figurehead? 2 3
4 Modeling Discretion and Self-Regulation 4 1
5 The Riefler-Burgess Doctrine 65
6 Coming to Terms with the Scissors Effect 8 5
7 Austrian and Monetarist Theories of the Onset
of the Great Depression 105
8 Coming to Terms with Benjamin Strong 1 17
9 Did Reserve Banks Really Compete? 143
10 The Seductiveness of the Decisive Leader View 1 91
Epilogue 195
Appendix 199
Notes 2 03
Works Cited 2 09
Index 211
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F igures
5.1 Fed credit and components, 1922–28 66
5.2a and 5.2b Riefler-Burgess Doctrine and Miron-plus Theory:
Seasonality 79
5.3a and 5.3b Self-regulated Theory: Seasonality 8 0
6.1 F ed credit and components, 1922–28 8 7
6.2 S easonal Fed credit and components, 1922–28 87
6.3 Base and components, 1922–28 8 9
6.4 Seasonal base and components, 1922–28 89
6.5 T otal currency and components, 1922–28 90
6.6 Seasonal currency and components, 1922–28 9 1
6.7 S easonal deposits, 1922–28 92
6.8 S easonal loans, 1922–28 9 3
6.9 S easonal interest rates, 1922–28 94
6.10 S easonal spread and discounts, 1922–28 94
8.1 Actual and predicted government securities, 1922–28 121
8.2 Government security residuals, 1922–28 122
8.3 F ed credit and components, 1922–28 1 22
8.4 Actual and predicted government securities, 1922–24 1 26
8.5 Actual and predicted government securities, 1927 1 28
8.6 Under-prediction of government securities 130
8.7 Percentage of gold held by governments 1 35
8.8 Number of gold standard nations 136
9.1 FRB Boston scissors 158
9.2 FRB New York scissors 158
9.3 F RB Philadelphia scissors 1 59
9.4 F RB Cleveland scissors 1 59
9.5 F RB Richmond scissors 1 60
9.6 F RB Atlanta scissors 160
9.7 FRB Chicago scissors 161
9.8 FRB St. Louis scissors 161
9.9 FRB Minneapolis scissors 162
9.10 FRB Kansas City scissors 1 62
9.11 F RB Dallas scissors 1 63
9.12 F RB San Francisco scissors 163
9.13 T otal and own government security holdings 169
9.14 Own account and system account holdings 169