The Federal Reserve and the Depression Essays

The Federal Reserve and the Depression Essays The Federal Reserve and the Depression Essay The Federal Reserve and the Depression Essay The Federal Reserve, established in 1913, was the leading cause of the Great Depression.They induced the Depression in a number of ways that is directly correlated to the collapse of the US economy.They played a key role in the stock market crash in 1929 and the economic failure that followed with policies that were horrid and also failed to address the new concept of the Wealth Effect and unequivocal distribution of wealth.They also exposed their interests to highly tumultuous parts of the world that carried a great deal of risk, and after the Depression, failed to enact or enforce any laws to help prevent such a disaster from occurring again. The collapse of the stock market is widely thought to be the cause of the Great Depression.The Feds policies during the stock market rise and after the crash were appalling and make many of todays economists wonder how they could be so wrong.From 1922 through July of 1929, the Dow Jones Industrial Average rose an astonishing 575% and created hundreds of billions of dollars of wealth worldwide.However, Federal Reserve Chairman Adolph Miller was extremely late to the game and did not even think about the possible implications that a stock market slump may have on the economy.Only at the beginning of 1929 did he increase interest rates, versus more ideal times of around mid-1928, when it became evident that the rally in the stock market had the potential for a long-term run up.But these increases in the stock market are not sustainable without the help of economic policies and Chairman Millers only policy was to sit back and enjoy the ride.Had he increased rates slightly throughout 1928, the economy would have slowed slightly, forcing people to focus more on their debts and paying them off, than the exuberance in the stock market.This would of course, have caused selling in the market, but at a slow pace, and would have given stock prices to catch up to th