ECON 2200 Lecture Notes - Lecture 47: Anna Schwartz, Monetarism
14 May 2018
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ECON 2200
Lecture 47
o 4000 US banks close; deposit losses = $3.5 billion
→ M continues to fall and Y falls as well
→ During this period, in response to the 2nd and 3rd waves,
the Fed still does not act as a lender of last resort. They
do not do much at all.
• Mar. 6, 1933: FDR announces 1-week "bank holiday"
o Inspection
o All gold turned over to Fed
→ Both inspection and the turning over of gold to the Fed
restored confidence in the banking system.
o Federal Deposit Insurance Corp (FDIC) established; begins
operation Jan. 1934
→ FDIC insures your money in your account
Decreases the incentive for depositors to join a
bank panic.
• Banking crisis subsides for rest of 1930s
o 1934: 61 banks fail
o Rest of 1930s: <100 bank failures per year
A. The Monetarist Interpretation: Milton Friedman & Anna Schwartz, A
Monetary History of the US (1963) – Main people who support and explain
the Monetarist position
• Focus on critical period during 1929-1933
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