![]() Information about the economy became available with long and variable lags. The governors disagreed on many issues, because at the time and for decades thereafter, experts disagreed about the best course of action and even about the correct conceptual framework for determining optimal policy. But when the governors disagreed, districts could and sometimes did pursue independent and occasionally contradictory courses of action. ![]() When these efforts yielded consensus, monetary policy could be swift and effective. The governors and the Board understood the need for coordination frequently corresponded concerning important issues and established procedures and programs, such as the Open Market Investment Committee, to institutionalize cooperation. ![]() The Board lacked the authority and tools to act on its own and struggled to coordinate policies across districts. Each district had a governor who set policies for his district, although some decisions required approval of the Federal Reserve Board in Washington, DC. At the start of the Depression, the Federal Reserve’s decision-making structure was decentralized and often ineffective. To understand Bernanke’s statement, one needs to know what he meant by “we,” “did it,” and “won’t do it again.”īy “we,” Bernanke meant the leaders of the Federal Reserve System. Return to full output and employment occurred during the Second World War. 1Sweeping reforms of the financial system accompanied the economic recovery, which was interrupted by a double-dip recession in 1937. The downturn hit bottom in March 1933, when the commercial banking system collapsed and President Roosevelt declared a national banking holiday. These crises included a stock market crash in 1929, a series of regional banking panics in 19, and a series of national and international financial crises from 1931 through 1933. A series of financial crises punctuated the contraction. The Great Depression began in August 1929, when the economic expansion of the Roaring Twenties came to an end. ![]() The Depression was the longest and deepest downturn in the history of the United States and the modern industrial economy. The contraction began in the United States and spread around the globe. The Depression lasted a decade, beginning in 1929 and ending during World War II. The Federal Reserve’s mistakes contributed to the “worst economic disaster in American history” (Bernanke 2002).īernanke, like other economic historians, characterized the Great Depression as a disaster because of its length, depth, and consequences. In 2002, Ben Bernanke, then a member of the Federal Reserve Board of Governors, acknowledged publicly what economists have long believed. Ben Bernanke, November 8, 2002, in a speech given at “A Conference to Honor Milton Friedman … On the Occasion of His 90th Birthday.” “Regarding the Great Depression, … we did it. ![]()
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