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This PDF is a selection from a published volume from the National Bureau of

Economic Research
Volume Title: The Great Contraction, 1929-33
Volume Author/Editor: Milton Friedman and Anna J. Schwartz
Volume Publisher: Princeton University Press
Volume ISBN: 0-691-00350-5
Volume URL: http://www.nber.org/books/frie65-1
Publication Date: 1965
Chapter Title: Glossary, Sources, Indexes for "The Great Contraction, 1929-33"
Chapter Authors: Milton Friedman, Anna Jacobson Schwartz
Chapter URL: http://www.nber.org/chapters/c9282
Chapter pages in book: (p. 131 - 150)

represent bankers' and trade acceptances bought by Federal Reserve Banks from bill (acceptance) dealers and banks. The
Reserve Banks generally buy all prime bills offered at the buying


rates they establish.

the amount of Federal Reserve credit member banks obtain through borrowing from Reserve Banks. In 1929-33,
two principal forms of borrowing, both known as discounting, were
resorted to by member banks in order to maintain adequate reserves:
(i) rediscouflts of short-term commercial, industrial, agricultural, or
other business paper in the member banks' portfolios: (2) advances

BtLIS DIScOUNThD represent

to member banks on their own promissory notes, secured by paper

eligible for discounting or by government securities.
CoNTiNuous ANN1AL R.rr is a rate of change calculated by assuming

continuous compounding. It is the diflerence between the natural

logarithms of a variable at the terminal and initial dates divided by
the number of years separating those dates.

S the ratio of commercial bank deposits to

currency held by the public. The higher this ratio, the larger the
fraction of high.powered money in use as bank reserves, and hence
the larger the money stock, given high-powered money and the
deposit-reserve ratio. The effect on the money stock of a change in


this ratio depends on the size of the deposit-reserve ratio.

no is the ratio of commercial hank deposits to bank

reserves. The higher this ratio, the larger the amount of deposits


outstanding for a given amount of reserves. Any increase in the ratio

of deposits to reserves tends to produce a dram of currency into public circulation, and hence changes the amount of reserves. The effect
on the money stock of a change in this ratio, therefore, depends on
the size of the deposit-currency ratio.
DIRECT PR.F.SSURF, nicritioned Ott p. 5, foOtnOte hii,

explairicel On pp.



between Federal Reserve credit outstanding and Federal Reserve

holdings of U.S. government securities.
FEDERAL RESERVE CREDIT OLTSTANIMNG represents principally the loans

and investments of Federal Reserve Banks. It is the suni of bills

Rusti vt Rank
bong ii r,


(I I 5(OU Ii ttd,


OVt' I nuien t SC( tin tics

a iid


.lONJElARY Aul1IORITIFS refers 10 the fiduciary contnibo.

lions of the Federal Reserve System and the Treasury to high.p.

ered money. High-powered money is a sum of Treasury obligation5
and Federal Reserve obligations. Against some of these obligation5
the nirmetarv authorities hold nonliduciarv assets, e.g., gold stock
assets for gold certificates: Federal Reserve claims on the public and
the banks. such as bills discounted or bills bought, For some Federal
Reserve notes and hank deposits at Federal Reserve Banks. Against

other obligations, the monetary authorities hold fiduciary


based on their fiat. e.g.. Federal Reserve holdings of government securities for some Federal Reserve notes and hank deposits at Federal
Reserve banks.
il IGH-I'owtRFi) MONF:V is currency held hr the public, plus vault cash
in banks, plus deposit liabilities of the Federal Reserve System to

t)aflks The total is called high.powercd money because one dollar

of such money held as bank reserves may give rise to the creation of

several dollars of deposits. Other things being the same (namely,

the deposit-reserve ratio and the deposit-currency ratio), any increase
in the total of high-powered money involves an equal percentage inrease in the stock of motley.

ISIPuCIT PRices is the index of iices obtained by dividing net national

product in current prices b net national product Ifl 1929 prices.
\foxrT.ARY AUTHORITIES are government bodies that exercise ultimate

power os-er the determination of the total amount of money in existence. The principal monetary authorities in the United States
since uqu have been the Federal Reserve System and the Treasury

STOrK is the seasonally adjusted sum of currency and deposits

it commercial banks held b- the public: in present Federal Reserve

it is the sun-i of currency outside
banks., .djuted dc
uiiand deposits, and commercial bank time deposits.

\rt x-sio.i, I'RoOtc.-l- is used intel-changeably with national income

the useasure ol net national product is variant III, computed by
'nion Kuinets in Capital in (hr 4ror,can Econoni: Its Formation
and Finaicing, Princeton for NBER, tg6i.

are the three majol

quantities we distinguish through which ans' changes fl the stock of

money lU) must. arithnieticaJy, occur: (i) high-powered money

H); () depusit-rescr' c ratio

U) (lcpusit.( uirrncy

'flic 1rnla cunnecung thn s' ish the iot'v stack is



IatI() (,,).


See A Monrtar' History, Appendix B. for the reasons for selecting

these three determinants and for the
method used to divide
a change in the money stock into the fraction attributable to each
separately and to interaction between the two ratios.
RESERVES OF BANKS equal high-powered mone

held 1w commercial

banks, and consist of ault cash in banks PIUS deposit liabilities of

the Federal Reserve System to banks, It is nor the sum of reserves

as viewed by individual banks, which regard their deposits at other
banks as reserves, It is the amount that would appear on a consoli-

dated balance sheet of the commercial banks, in which inteibank

deposits cancel out

VELOCITY is the ratio oF net national product in current prices to the

money stock. The money stock is the estimated average stock for the

time unit (generally, a calendar year) to which the net national

product refers.


Primary Sources
iN WRrnNc A Monezaiy History, we did not have access to the internal
documents of the Federal Reserve System dealing with monetary pol
icy. We were therefore pleased by the announcement in August 1964.
of the intention of the Board of Governors of the Federal Reserve System to make available to scholars most such documents Covering the
period 1914.60. These will make it unnecessary in future research to
rely as heavily as we did on the following primary sources.
The Goldenwe,ser Papers. For a description of the papers and their
author, see pp Si -52. footnote 407, trot pp. I 21-I 22, tootot
The Diary of Charles S. Hamlin. 1-lamlin was a Boston lawyer who
appointed to the Federal Reserve Board in August 1914 for a twoyear term, and reappointed for ten-year terms fl igi6 and 1926, serving until 1936. when he was appointed special counsel. He kept
detailed record of his daily round of activities, including proceedings
of the Board.
The George Leslie Harrison Papers on the h'deral Rseri'e System
Harrison was a deputy governor (1920-28). the goernot- (lq28-3tj
and president (1936.41) of the Federal Reservt' Bank of New York
Harrison's personal files, covering the period of his association with
the Bank (1920.40), contain many official memoranda
and other documents. Items are identified by the titles of sections of the Papers,

as follows: Conversations, 1926-40 (cited as Harrison, Conversations)

Office Memoranda, 1921-40 (Harrison, Officc, both records

of con-

versations, with some duplication N1ice1Ianeous Letters and Reports. 1920-40 (Harrison, Miscellaneous), Copies of correspondence
with the Federal Reserve Board and others: Open
Market Investnient Committee, 1928-fo (Harrison, Open Market), minutes of
regular meetings, nleetings of the eccutis'c committee,
memoranda, cotrespondence resolutions: Governors Conference i q2 I - o (Harrison.
Governors), detailed agenda for meetings: Discussion
(Harrison, Notes), minut(s of meetings of thc board Notes, iq'o-o
of directors oi
the Federal Reserve Bank of
c5v \'ork and of the executive cornInittee: Special Memoranda, i 93-10 (Harrison. Speciil). discussions
of polic questions prepared by the Bank's
research stat-I


Cu SAT t6 Simon Kuziiric. (. apita( ii thr .1 ire, ran t:corio,;iv Pt ItlCtj
liii Nil ER
(siwsk. variant Ill, Colnponen( fliethmi.
191 from worksheets iiiiite!l trig th
money ncoinr and rca I ncorrte) SI orre I 150)11 it' ills deii liv real I rrcorr

(ill) p cii
price deflator). A Mo'rrla,r History, ahk A
}. 7o.7 3. col. H (iiifliSCV stock),
TbIe A-s, P. 774
of the Urijfrcj

States. 178019.1 . Bureau of the (.CIISIIS. 1949, p. 344 (wholesale price i Ildex) in.
dias(rut( Pvoductro, 1Q') Rx'ision, Board of (ovCri]ors of the Federal Rcscrs
Stenr, 960. p. S I 't (rttdtiirial prodisclioii(. ih National ltire' Research on
indicators of Cyclical Revivals arid Recessuini NRER. ICC. iqfio ))



.4 ,lfonrtirrn History. FsIiIe


71 5715. oils. p. a

CHART 28: ijusineir Cycle ir,d,narorc. C. H. Moore, cd., Princton for N8ER. ii6
'd II. p. 9 txi sonal income). liiiloriral Statistics 'sj the (nitrd Stairs, i7X,
,,, Bureau of the (.cnsus. 1q49. p. 344 (wholesale price in(kx). iridisi:rial Pro.
durti'in, 1950 Rei'isio,i, Boa iii of 5,osm-roots of the Federal kecerse Systmsi


p. S'ri (industrial prodution).

Citstr 29: Co,n.nmori'.$tock lridexei, I":.s;;, Cowli' (;onlrnjissjon for Research in
Economics. Bloormiirsgion, lirti., Principia Press. 1938. p. 67 kons'non stock price
index). fiankirr mind .ltorreinzry \lmSiiit;ec, Board of Gosertiors of the
federal Re
serve ,istenl. 943.
4";(5.'(I (usiiimrmerctal paper rate(; pp. 46(5.470
icld on
corporate bonds, Baa, and on L'S. gucerninent Isonils): p. 441 (discount rac,

CHART 3O Federal Reserve !rslleti,i, Sepi. 1937. p. qoq.

CHARt 3t

A Monetar5' History, Table At, pp. 712.713, to). H. and rahie B1, pp

fl3.flij4 cob. I. 2. 3.
CH.SRT 32 A. Liabilities, .4
powered moons); Tahlc

fonrtai's Htitory, 1 aIsle 11.3. )p. Hii3.$ii4 tol

pp. 73(1-7411. col. a (hank deposits at Fedetal Resetc

Rankst; lttsnkcng and Montmsry .taf:ltici, pp. .411.fI2 }edrI Recerse notes
Tieasiir currency, gold coin tiil gold ten iltcj ics) . plus S2$7 101 Ilioti dcductcij bs
Federal Reserxe added back to gold coin. seaso,talls irljtisied liv tic.
B. Assets. ibid., p.
(Ilionetar'. golil stotki pins 55117 rtiillinmri leilii tc'iI l Fed
eral Reierve added back, seascitialls nljiisred Is tic; 1P ''7!i, Fccln-r.il Rese'
credit otititantling and Sc stem liohltnc iii I S goc 1'! ii!ile'lii 5Cr unties liTre etscli
corrected (or trastnissl tutu r'riieuitc, and the latter- suiliir.ictcml fioiii ntrc fist itici
(Federal Reserve claims on the pitlilic and loOks); high Pols err'nI nioucs titinirs
Iflofletary quit) stock mu ntis F'edcra I Reserve c its irim S oil I lit' pus) Ic and ha msks (oilier
phssncai assets arts) Ii at of the flionc' tars .i u thor itt's).

: Banflnng 'ord .forietiary .Stti)tirr, pp. ''y' ;71u tFrder.iI Reserve credit lint

sianriiiig. L'S gulserilupirot serIirI(lc.s held. huilk limuiritsred; lulls liotigluli. cr45011
all s adjusted hi us ''() i her'' isIs its tied a a rest its I -

w!,_.___ s1_.

Author Index
Adams, Arthur B., ii
Anderson. Benjamin. ioi. 108-109
Angell. James W..

Hansen. Alvin H., to,


67-78, 80-95.



05. I04)-I0t.
121, 134
Hoover, Herbert, iS, 24. 29. a.

Bagehot. Walter,
Beasley, Norman. 36

110. III. ti6. 1)9,

Bopp. Karl,
Burgess, W. Randolph, So
Burns, Arthur F., 28
Burns, James M., ,

Chandler, Lester V.,

Harrison. George L.. 6. 21-22, 24.

35. 43, 43. 47-48, 52, 54 59-123

James. F. Cyril. i6
Jones, Jesse H., 29

Kemnserer. Edwin W..

t t6. 117.

12 I

King. Wilfred I..



Chapman, John M., ai. 09

Macesich, George.

Fisher, Irving. 114. 117

Freidel. Frank B., 36
Friedman, Milton, 7

Reed. Harold L...p. 114

Mirchell, Wesle C.,

Rogers, James H.. 114

Gaibraith. j. Kenneth, it

Salter. Arthur. 66
Schlesinger. Arthur \I.. Jr

Goldenweiser Emanuel A.. St. 101-11)2,

Schtimperer. Joseph A..

104, 105. I(. 117, 134

Goldsmith. Ramond W..
Gordon, Robert A.. ii
Graham, Frank D., 66

Smith. Rixev. 36
Sprague. Oliver 'sI

l-{amlin, Charles 5..

Vtllard, Henry I-I..

't.. 54. Ii;.


rhorp. Willard L..

68, 70. 71. 73.

So. 84.85. 102, 1o5. 118.119, 121-122,

Ilaitiutond. Bras, 53. tio


Warburg. Paul 51.. 25

SVarburron, Clark,
a. 6, uio,

Willji, H. Parker, 29. r09, ii

I c7

Subject Index
Page numbers in itaIu's refer to tables and charts)
overstatement of, 34

Acceptances. bankeit

bought by FR., 92. 131

buying race on, of N.Y. FR. Bank:

above market rates, and decline in

FR. holdings. to8

Board delay in approving lowering

1930. 71

changes in. FebMar.

if below market rates, effect on free
gold. to8n
inadequate declines in. after Oci.

Aldrich.Vreelartd Act:
pattern for National Credit Corpora

Austria, failure of l'redita,istalt and, ,8

composition of. loans:
to brokcrs and dealers for account

of N.Y.C. banks, to
0 brokers and dealers for account
of others. 9fl, tO, 39-40
decline in value of. and hank sunpemittOflS. 1929.33,

g'6o, pn

dumping of. gif.

preventable, if enough high.pow.
ered money. 6i
examiners' valuation of, 23, 34, 60
N.Y. list of legal invcstntcnts.
n. 8j
quality of:
change in. and 1929.33 contraction.
immaterial, when do is pci I ii

search for liquidits.

hank capital:



made and RFC insesmeil in.

33. 34


shot t -


Bank of the United States.

Rank of lJraited States, iII.. Gm. &i

attempts to present failure of. isis

good payout record of. ty,
possible impairment of assets of. ja
rise in memnuser hank borrowing after

Bank assets:



Bank of France:
uncertain of U.S. adherence to gold.

ii rged to repatriate L'S

reduced. Aug. 928, 8

changes in FR. holdings. 1931.32, ys)


Bank for International Set'lemenms. 8yn

Rank of England. discou,tt rate. 90.


1931. 87

raised, Mar. '933. 30


shrinkage irs. am.

preventable. ii enough high.poss
ered money, 6i
valuation of. rulings on, 25. 340. Go
Bank failures. see Bank suspensions


liqudits crisis aml shrinkage ii.

failure of. 47
Rank suspensions.

i 2. 28. 48, ,'yfl

accelerated liquidation sought. a

by Batik of U S.. impact of. 15.15

capital baa vs. decline in money stock

caused by. y.yG

causes ol 57.bi
concentrated among small. nonmcmher banks, 62.63
sleposi t It abilities of. I . 20. 8
deposit ration and. y I
effects ol. direct ant indirect separable.

linsited hs lestrictiom, of payments.

15. 20

nones' niock and. Iii

offsetting effects ott demand f
supply of mones. y
open market purchases. miis. effect
of, on, 27

ortgin of, question of. 'ft

private efforts to limit.

ri. if;


qnal!IY of ci't'i1t, ''hp. It'.

!!1.I.flhy, 'f, changv'

(21150 of, 51)

iQ'Z(1-33 %5

reported number in

837. (lttest!1)fl-

as result of declining bond prices.

rise in. due to F R. ight
193t. 21
S'stettt Vt&'WS Oft, 6 -62



Bills discoitnmed us F' R

.r.- Disci,iurit

Bonds, corporale:

ff430. 12

effect on arithmetic deicrnsinants

'of money itock, 46
return of confidence after. it;.
1931. i7ff.

compared with tOO?. cii

effect on arithmetic mlemerininanis
of mones' stock, 47
international events leading ii',
ttieasi,res to rcliere, an

I 930-33:

differences between,

inti'eaonglv severe. 46-4. 95

Banking holidays'
933. 3. 32

lower-grade. ilunipt'l In
search (or lnttofjis ii'i,


banks it,

Baa, 8

decline lilt gos rriiincnti linus is

rise (In lower-grade.
Rorross tog. utetulser hank
aversion it), 22. 2q - :1
della t tiunar', effect iii. i j"




eligible paper for, thistri ILtti,'it uti.

FR, pokes and, tu1,
Broderick. Joseph A.. iti
Burgess. W. P... .',q. 7 tn c. $n, qo

is, earlier restrict ions of pasments.


on duration of cycles undet FR.s

i t6n

opposed rise in NV discount rate.

Oct. i93i,
tIt,siiiess contractions:


types of. 2911

transmitted bs t;.s. to world, 64

Banking panics:

929-33, 31T


restriction of paments and,

'933, 288,. 35, 53ff.. 93ff.

events leading to. a8, 34-3
fractional reserve banking
and, 123

Canadian experience during. ;Ii

change In, ss'ith rise in bank fail

930, ir,

compared with other periods.


intensifier of business cycle coniraction, t

Banks commercial:
liquidity preferences, 6o-6i
member banks:
N.Y., effect of currency thai,, nit,
'933. :4'

Board of (tascrriors of F P.. S%stens

compared with R Board,

ss. losses on stock market,

Banking crises:

declared b' states:

'93213. 28-29
by N.Y. and othets,
effect of. 29-30

ui39 f3.

.ci'e olin Rink asset,: Rank taptial

Bills bought lii F k.. er Acceptances


n'ntemporarv siciss on causes of.


distinguished fr,ia

banking criis,

i i3

double bottom of.

effects of. 4

iniernationat aspects of. 6j.6'

anti mones stock decline. 4-',

ol. as orstt hg
eventS, 9
res 5.uI. ssgs:s of.

iiO5't .1 r

I (I

con t ri t,u ton ii, change in si'sites ,

slecliiie in. panic'induced. t;, ta.

money stock, effects Oil, 3-5'

severity of. II)

Clkin. John U.. 76.

e,tchaflge rates 55



steeper tim 1i33i than its




tuning lead over (leposit-resceve

ra!io, 19
vulnerability of harks to.

.rid Britain,


it peak level. 1930. 44

rate of change in. 38

t)eposit guaranty:
federal hills to provide. a

ug2933. 56

on silver standard:

Deposit-reserve ratio. t. a. 131

effect en Britain's 95) departure

horn gold on. 66
world dedsiic
insulation from
l9293i. b5.60
Clearing House AtsOcIltls)fl .N .Y.:
refusal to assist Knickeritocker i'rti.
Bank of U.S.. i4fl

changes in, 96.98, 102

constancy of. 1929-30. 4'

contribution to change in moimes.

decline in. panic.induced. .j.
and deposit contraciion. r,u

from 929 all time high. to Irs ci ni

1912. by 1933. 46

State banking holiday, attitude to.

wards. i933. '5'
Commercial paper. rates, S

liquidits crisis and rise

930 bank-

ing crisis. 4

000ev stock decline.

no bank 1alurCS in. 92933. 56





relative in FR. discount rate:

stable differential. 193!. 9
fall below discount rate. 932. 27
Critsinger, Daniel. resignatiOtl of, ti
Cunningham Edward, i2Ifl

lag in decline vs. (leposlt'currencs

ratio decline.
money stock, effect on, 37
member bank, N.Y ss other, 1- II
rare of change in. 38
vtilnerabIitv of banks due' 10 rIse in.

Deposits, commercial bank:

changes in. 6

and FR. light money. 93!. 2i. 50.


held by public. 6
actual arid hypothetical changes iii.
97.9ff iO3

currency and postal savings, at-

'dearth of. during panics. 'u

demand for gold vs. other cur
renCV. 1933, 30, ;4

rise in. during panics. t'. 28. u. -,

and stock market crash, to
substitutes for, during panics. 28.

tempts to convert 10(0. 1?

and loans for others, 9-lu
guaranty of, 25
rise us. Oct. 929. .F2
suspended, 10, 13

sa. decline in operating hjnk (IC


outside Treasury and FR. Banks:

composition of. c
See also High powered money

posits. 21

changes in. 6
and currency ar,d postai savings. t.

Deposit-currencY ratio, ;. ii
changes in. q6'gff,

demand, adjusted:
changes in. 6

l)eposits. federal Reserve:



toiiiiiiercial batik

dollar- franc, cyclical itirris aitti iii

hxed, tl

changes in, 40
suspension ol
933. 30.31

requirenienis for.


Direct pressure, 34. 1(14)-itO. 131

11150 14(I0Ii front cc lieu I decline i,s


Federal Advisory Council:

and expansionar'. nIonet3r

if below government bond



New York, 8. q. 71. 38. 48, 4)',

Boards delays in approsing reduc-

Federal Home Loan Rank .-ct, a.5j

Federal Ilonie L.oari Banks.
Federal Reserve Act:

and liquidity crisis,


Federal Reserve Bank ol N,','

and Rank of France, iou's

tiOns. 71

decline in:

after ig banking crisIs. 47

approved by Board wiid it joti ally, 68. 71

rise in, Oct. 1931:

and intensified domestic finaiicial difficulties, 22
ii open market purchases made.

and Bank of I'S.. failure of.


conflicts with Board:

over bill rate changes. 'i
05cr discount rates, 64',
05cr open market purchases liii
own account. 43, ti-fl9. ;8
discounting, increase irs. Oct. 1929.

pie-Oct. 1931 level not restored.


relation'., awareness of. 7i


1952-33. 104fl

open market operations, for own ac-

wide support For, 85


rise to 6% in Aug. 929, 38

Discounting (bills discounted),

a. ii

Dollar, devaluation of. rtiriiored



authority, question of. 68. 78

in Oct. 1929. .. 66.69
in Mar. 4)10, 72
in Dec. 1Q30. 80

defined, 104

without Chicago and Boston participation. 1q32. 91

open market operations. System:

holdings of. 1932. 109

Emergency Banking Act. '955, 35
provisions of. 32. 4',

pitrchases urged by. 66. 68.

Relief and Construction

Act. 1932, 240, 29n

Exchange rates, domestic. dislocation

during panics, 34
Exchange rates, foreign:

Caadjan vs. U.S. and Britiali.

forestall Congressional aciro,i.

Apr. tg. 88

Eligible paper:



1930. 77

changes in. arguments For:


('lntraciioti li

flexible Illoating):

l)iscount rates. FR,. Banks:

changes in. 30
relatise to market rates. 27. 4',.
rise in:
maintained too long. 1920-al. 64

vs. open market operations,

spread of t9ag.

87. 89


reliance on OWn bill purchases as

alternative to. 73, 87, 91
personnel, technical:
favored expansionary polk'.. 14)29'
33. 78, 91

understoo4 relation between hank

changes in. 186779 1929 440

failures and deflation, 6z


posttlon of. in SVstc'rn.


Britalns departure trnt gold.

l9t. 21, 67

dominant, under Strong, Ill)

n Ssclem international monetais

tiaims on p'sh4ic 5nt banks.

changes in, 41
conflicts within over:

relations. 84

leo of leadership

after Strong's

death. 117. 120

reserves of. drain on. Mar. iq,

discount rate rise, N....1929,


67-70, 72-73

open market purchases. iq. 8893

open market purchases vs. saks.

advances to member banks. iu

governors' opposition to expansion.
sty monetary policy. 1931' 75.77

1930.31. 7484

gold flows and. 2! -23. 84-86

gold reserves of:

nonbank discounts b. authorited

ample. iqi. and possibility of in.

crease in. too
and French balances, earliri- with.


See ,-ilo Deposits. Federal Resersc:

Federa! Reserve System
Federal Reserve Board:

drawal of. tga, 102

gold standard arid. 84-86
international cooperation of. 48n. 85

bill rate changes. power to approve:

conflict with N.Y. over,
delay in appToving reductions, 71
discount rates, veto posrer over, so
order to Chicago Bank to reduce,

and leadership. 1929.33. 9. IS

panic wittsin. Mar. 1953. 36
policy alternauses:
if gold sterilization applied. 1931.

927, I17fl
reductions in 1929-3o. deloys in approVing. 71
risc in. t929. repeatedly vetoed. flq


if more high-powered money provided. 1929-33. 5. 96-too. los-los

power shift within:

to Board and Banks, Irons N.Y..
IlJ29-33. ti8-iat

ex o8lcio nsembers of. influence of,


governors and members of, 'so. 12111

leadership. effective, lack of. 929. 20

powers of:

adequate to prevent 1929-35 col-

and open market operations. power

lapse. 112
additional, after 5929.33 collapse.
use of, 1929.33. 115. 22. 123


policy role of vs. that of N.Y. Bank.

78. 840

reserve r2tio of:

comparison of tgiq and 1931. toolt

security speculation, efforts to curb.

Federal Reserve notes,


open market operations, control of.

See also Discount rates: Open market operations

Federal Reserve Bank notes. 32
Feder2l Reserve Banks:

effect on.





sterilized, to's
reserve requirements. suspetssion of.

conditions of issue, collateral requirements for, 104


reduction of. in FR. tills, man. Io.

and restriction of cash payments. i

salary structure. Board s's. Banks,


Federal Reserve System:


actions of. independent of current

Strong's influence on, ui6

See also Monetary policy. F.R.

conditions. a8

and Bank of US., failure of. t4n. 6i


(,old flows, international:


gold demand by. 1958-33, 66

short'term balances in U.S., withdrawal of. 100-102
Get-ma fly:

British assets, freezing of. igt, iS

loreign exchanges. control of, i8
siandsull agreement with. iS
world decline, inulatjon from. 1920.
Glass. Carter. 9255. 109fl

bills for bank i-norm introduced hs.

25. 35

exchange with Harrison,

opposed deposit insurance. 25

1931. i8

as result of;
US price decline,

to promote internal stabilit.

79, tOO

international effects of, 1929, 65

System concern with, 193o, gts
hank reserves, effect of on, 1931.
changes in, 49-50
to France. FR.
1931, lOt



Britain's departure (ruin

Glass.Steagall Act, 67. 88, 9, 107fl

1090, Ito. ivan

eligible paper ample despit'
and free-gold problem. io8r


1931, 64


monetary policy unchanged

provisions of. 25. 104
Gold. 40

(iS. price rise, 1919.20. 64

Gold standard:
departures from. by:
Great Britain. 1931, gif., 4gfi., 6&

effect on China and Canada of


withdrawal of. by substituting FR.

notes, 1931.32, 54

effect on U.S. money stock of.

other countries:

and (iS. gold sterilization.


public's preference for. 1932-33. 54

domestic hoarding of. 4

free, 8. 88, g. PO4

expansionary monetary poiicv.


no threat to. g6
monetary stability, internal, and. 6
and US. gold-sterilizatioa. policy. 64.

concern oVer, 107.111

defIned, 104


fit-at O.M.P.C. reference so.


insignificant in determining FR.

1931. Feb.

1932, 87-88

reduced by open market purchases

via reductions of discounts,

reference to.

offset to decline in deposit ratios

as result of:

to devaluation, 360
real tids advocate. gun

policy. 107.110
not a problem. Oct.



in Svstm sources,


(;old stock, U.S.:

changes in, m8, 2021. 41. 515?
at historical peak. Sept. 1931. tin
Goldenweiser, E. A.. l22fl
Goldsborough Bill, hearings on. qon.

Government debt:

held by FR., p
marketable bonds:

in demand as collateral for loauis

shortage of, alleged. 104' 106

supply ol. io.lo6. to8. ito

from FR., i

vs. excess gold reserves. 104

liquidity crisis and rice iii ratcc on.

(;oid exchange standard. 6

1931.32. 2


siew of ohei gosernoTs Ofl, 70.71
O.M.!.C. and CM. P.C. cornprrd.

prices, decline In, 1931-32. do

)tCldS 00. & 03. 19. 23, 27 2
Great Britatn


cyclical trough of 1932. 1911

international credits to. 1931. i8

gold ster'lization. 1930.31, 8s

purchases in 1932 without Chicago
and Boston Banks' participation.

motietar% policy of, 1931 -32. 190

Great Contraction, 192913. tee Busi-


ness contractiOfli

Growth rate, computation of.

l-tigh.poweted money:
actual and hypothetical changes. 97-



Hamiifl, Charles. 1210

adequate supply. need of,

favored rise in discount rates. Ocr.



1931. 8n
Harrison, George L.. 122
Bank of U.S.. attempt to sase. 1311
sy money conditions denied
Apr. 1931. fz
rBorts to conciliate System. 73. 78.

changes in. 37. 40.4!.
opposite in direction to money
stock, 1930-3%. 36

contribution of, to change in money.


decline in. 44. 51

8i. 90-92

defined. 132

exchange with Glass. 920

2nd expan5i0fl21' monetary policy.

during banking panic of 1q33.

rate of change in. 6
rise in:
due to gold inflow, 48
inadequate to prevent hank fail-



earlier and larger rcducttons in

discount rates, 930. 45
expansionary action. 1930. 1931. 71-

ures. fib
smaller than currefics drain. 1931-


nationwide bank holiday.



gold inflows. .49

national bank note increase. 1932-

foreign developments. concern osel.

rise in discounts and other Rcserst'

purchaSes. Jan. 1932. 87

rise in discount rates. Oct.



credit, 50
Hoover. Herbert. Si
debt moratorium, anti. t. $.

July 1q31. R

on free gold. ro1n

French urged by bins to withdraw

short.term U.S. balances, loin

Income, national. 2. 132

and Jan. 1933 System portfolio. 93,91


8UCnCe on Ssslem.

nsonev, changes in.

personal. 7. 8

loans to buy gold. attitude toward.



changes in. 3.

member bank borrowing. hesitation

to encourage. lion
N.Y. Bank's authority to putchase

lower in 1933 than in igib. r

per capita. 5

percentage decline. U S. and

for own account:

conflict with Gov. Young over, 68

reasons for NY. purchases OcI
1q29. 711



ada. iqaqIS. yfi

independent Treasury System.
Inflation and gold outflow. toO'tOZ. ti


Interaction of deposit ratios, 8. 131

Interest rates:

banking crises, effect on. of. i6, ig

cyclical behavior of, it
decline irs market races, relative to
FR. discount races, 1929.30. 45

urged System to do more. ,o forestall

Congressional action. . 9293
Miller. Adolph. 45. flu. 68n. 8i. iain
on countering internal drain, uoon
on expansionary program. Feb. 1932.

liquidity crisis, and rise in. ig. 30

on N.'. Bank's unauthorized pur.

open market purchases. effect of, 27

chase. Oct. i92(. 68n

opposed to open market sales, Iaii.

James, George, lain

i93l. flu

on rise in discount rates, Oct. ig,,

Kemnserer, E. W., i tn
Knickerbocker Trust Co., 15


Lehman, Herbert H., 51

attempt o save Bank of U.S., I4ti
Liquidity crisis:
financial leadership crucial to halting
of, iSS
remedy for:
applied if Strong had lived. i 6-i 17
known before i929.33, ii

not generally urged. 1029.33. I

urged by Sabath, 13.117
restriction of payments, 1930. 20

active, 19205,

I 15

conflicting criteria for:

real bills vs. jnvent,si-s theory of
business cycles. 77n

during internal anti external drain.


Magee. Wayland W.. iain

McDougal. James. 38n. 8gn, 90. 91. 93
on member bank borrowing. 88

on open market sales. Oit. igt, 86.


on 1932 purchase program. Sqn

pressure by, to stop 1932 putchases.

McGarrah, Gates W., 8n
Meyer, Eugene, 31, 52fl, 6, 8o-8a, 84.
85, 88-90.93, iO7n, l2o. l2ifl

expansionary program. Feb. 1932,


larger purchases, 1931. 82.84

rise in discount rates. Oct. 1931. 85

Mills. Ogden L.. 8g. g. iion

Mitchell, Charles, 'Ign. 85
Monetary authorities, ia
physical assets and fiat of. .i. '32
Monetary p01kv. FR.:

bout with FR. "lsard.money

crowd," Sin
opposed to:
gold sterilization. 8j

open market sales, Jan. 1931. 8u

as RFC chairman. aqn. iso


and Bagehot's prescriptions

ease internal drain,


free-gold problem as defense


103' iO4

restrictive. 99-100

and System policy to sterilize gold

outflow abandoned. gg-uon

of expansion, called for, iqo.

failure of, 1929-33,


goal of external stability genrralhs

accepted. 67. 86

lag between action and effect


ii 7fl

of more than sterilizing go!d inflows.

1930. 79

of not replacing decline in discounts.

i929.30, 44-45, 79
of open market purchases, 27. 115
i926.57 VS. 1929.31, 115

opposed to seasonal easing. 1930. 78

passive, hesitant. 1929.33. ii
of restoring its reserve ratio. iqso-s I.

of restriction si


aftrr gold drain, 1931, Si

decline in bond pricec anti ,se
in bank failures. 87
wide support for. 67. 86
contribution to severity of 1q20.
a, contraction, 64. 123
FR. disclaimer of effect on

open market purchases, 1952, 27

irock market crash, io

goid stock as ratio to, 1929.33. 85
percentage decline in U.S. and Can.
ada, 1929'35, 56

proximate determinants of.

rate of change in:
decline in. 51

25 U.S. decline. 23




highest, I95l33, 22, 49

lead of rise and decline in, 28


decline. 64

reference to. in System discussions.

of sterilizing gold flows:

burden on rest of world of, iqsg-

Moreau, Emik, ii,

tight. tg;o. 79

Morgan. J. P., 9fl

Monetary standard:

uncertainty about:

banking holiday of ig;s and. 3

1933 and. 4
Money tiock. U.S.. , 6. 7
changes in:


See also Velocity

31. 64.65



for gold


National bank notes:

bond security for, 52
changes in. 52fl

National Credit Corporation. 24.

cor,trsbution of determinants to.

Aldrich-Vreeland Act as pattern br.


613.. 132-133

Net national product. 152

decline in:
1929-33 VS. l87.79. 1920.21.
atypical. in expansion:

Norman, Montagu. ii;

support of real bills
criterton for monetary policy. 770

Norris. George

1928'2Q. 3

due to FR. credtt decline. 929-30.

44-46. 79

but rio distrust of banks. ' t-ts

probably not preventable with

conceptions of rime, ii'

due to FR. tight money policy.
1931, 2 1-22. 49
income decline compared
1929.33, -6

Open Market Investment Committee.


directive by, Oct. 1929. 67

recommendations for purchase of
government seCUrities. Nov. 1929,
68, 70

reluctance to purchase. 1q30. 72


Open market operations:

N.Y. flank's arguments for expand.

ing. 190'5t. 1932. 66, 75fl

preventable. 1929-;;:
with adequate high-powered
money. 6i

Meyer's support of, 6-7

purchases, 10. iS, 26ff.

with knowledge then available.


question of, Jan-Mar. 933.

and severity of contraction.



Burgess' summary of results, go

Congressional pressure for. a6.
48, 51ff.. 67, ItO, 125
end of, a. 9;
high-powered nionev. elfeci ott.


defIned. 132

effect on, of:

bank failures. 5


banking crisis. tg;i. 8 iq



cttck 'Jedine slowed b,


partly offset by gold outflow and

deposit ratio declines, 51
pressure to stop. by Chicago and
BostOn, 9091

bs F.R. Bank of NY.. 1931. 48

needed to offset gold and currency

drain, Igi, 22

Standard and Poots its(Ie

of (0111.

lOOn, 1929.33, 8

Production, industrial.

opposed by Governor Young, June

1931, 82

unauthorized, b FR. Bank of

NY.. Oct. 1929. 43, 66-68
Open Market Policy Conference, ,6n,
22. 23. do, di. 62, 85
Board's session with, change in tim
ing of, 84
composition of, 118, 20
directives by. 80. 8, 87
division in, Jan-Feb. 1932. over.

to reduce System portfolio. Jan.

'933, 94

executive committee. 86
and oppositiors to purchases, 83

recommendation to sell, Jan. 1931,

rejection of Harrison
role of, 72, 118

F.R. Board inde. of, a.

Quality of credit, 58
Railroad bonds:

effotti to reduce pressure on pricc

of, 23.24

Real hills doctrine:

in Norris metnoran,Ju,n, 1930. 711
Reconstruction Finance Corporaijon
1' 34

authorized to invest in hank capItal.


bank loans, disclosure of. 29. 34.3,Ii

inability to prevent panic. 1q33, 29
purpose oF. 24

recommendation to buy or sell,

Oct. igi, 83.84, 87

no meeting, Feb. ig3.

procedures criticized

L.S. 210ck niarket:

changes ill. 9
rash. Oct. 1929. effect ttn mont.,
stock, 9
decline iii share calue, size of, 959

Rediscounting, see Discounting

Reserve Batik credit. 131.132

actual and hypothetical changes in.

5930.32, 96, 98. 102
changes in. 8. j8. 42. 52, 77n. 88. 90

during 1931 banking crisis, 48

during 1933 banking panic, 30
inadequate to offset internal and

external drains, igi. 22




composition of. 42
decline in:

purchase program of 1932. 88.g

Owen, R. L., iin

far greater than increase in gold

Platt, Edmund, 70n. izin

Postal Savings System, importance of,
1929.33. ian

stock, 1930, 79
and in money stock, 1030. 78.79
return in coisfitience offset by. 1931.



during banking panic of q.

U.S. commodjp,-:

inadequate offset to decline in dis.

changes in. 3,
defined, 132
wholesale, changes In. a.

as result of 1932 purchases. yys

coUnts, 1930, 79

rise in:

due to rise in discounts, '911-32.




decline III TCcrSCS. jan -

far helc

Feb.. i. q.

Run on fsar,Ls

erJ' Ee5tri':1los of pasnients to end.

rniilns. ir. 030 hinkirg ci'cic. 1

cis.s,)rs effect of discounting and.

se!f-jus'ifsiiig 6on


Sabath. A. J , On t950 liquidity ClOts

Reserses. excess. r,o

ch.snges in. i72I, 91
rlegigible. 192930, I2, 4(1. g6
an, open market purchases. 1932.

reliance or..

I 13

Schacht, Hjalmar. 115


s. discourning. roi-a.

Seas, George.

8n. g. tor,
SiIer siandard:
China's experience with.
Snyder, Carl, 7415, 78


significance of. legal 's prudential.

932. 52
Reserves held:

commercial banks, o
actual and hypothetical changes
in, 1930-32. 07, 98, 103

Sprague. 0MW.,
Sterling area.
Stewart. Walter Vi'., 122fl
Stock market:

crash, Oct. igzg, gif.. 8ff.. 678

absence of panic following.
attempts to halt, (In

1 additional available. 029.30. 4',.

effects of. io.ii



and money stud decline, OCI..DCC

drain on:
.nternal i's. CXtCr!laI, 20. Q, 53
not offset hr increase in high-

tentpoarv shift of loans to N. C

powered money. 22
niembec banks:

NY. rs. others. 0t.

1029. 44

banks arid. 3839. 43'4

fears of revtral of speculation. igt.



Restriction cii casti pasmenis:

bank activities during pre'1933 in

stances of, 32-33
dates of, 32

Strong. Benjamin, I iii, ISO

central role in Sysiem in (1205. Ii',
death of. 117.118
on lag in monetars' fliC'.
on open market purchases to sirp a

panic. ir6
on purchases for own account by

likely in 1Q29, igw. oi 93! under

1907 banking system. i. 20
and limited bank suspensions.
limited decline in money stock, 32.33

N.Y. Bank in eme.'gencs-.

Suspension of specie payments:

penalties for, laws for relief ol 32

1933. 42fl

as protec:ion against runs on banka.

as remedy for banking panic. I',
as solution to panics:
defects of. 3-34

vs. restriction of cash payments. 34

55. suspension of specie pasnients.

Royal Bank of Canada:

on US. liquidity crisis, i

urged FR. expansionars monetary
poller. 1930, 77-7


Treasury Department. U.S.:

currency, change in. o
deficit. size of, 1931-32. 23
Treasury. Secretary of'
Mellon. Andrew. 69, I I7fl. iaSn
Mills. Ogden L.. 290. 31. 9. 93
measures to combat, z6


efforts 10 %ec1re Chicago patsiupa


changes in.

tion. l9. 9i,

Ocred purchases sitli

cvc.ical beha'ior of:

aiplirude iike that )t income and

money. b.7

percentage decline. U S. and Canada. 192913. 36. si

defined. i
Warren. George. 36
I.VtllLs. H. Parker. i
opposed open market purchases. iii

real bills advocate. ian

Voung. Owen 0.. 69. 88.




discount rate rise. 86

hesitation ti) encourage !lieITlbet
bank borrowing. ion
Young. Ro A.. 6. So. 88n. iign
conflict wish Harrison. 688.
power of on O.M PC- XCCUtLie
committee. So
open market purchases. 91
purchase program. 932. 89n
pressure to stop 1932 purchases.