Monetary Policy and the Great Depression

[Travis Retriever]

Unless otherwise stated, I am referring to this video:  [yt]Ff1picZAWc0[/yt]

Shane, your video has given me some more questions than answers.

First off, you say in it that the gold standard, by coining more money, would have solved the issue.
But from what I understand, the Fed WAS printing money (easy money policy) at some point to stimulate the economy.  If an increase in the supply of money didn't work like that, why would it have worked through the gold standard's creation of new money?  Is it because people trust gold more than they do fiat money and would be more willing to use it?

Another issue.  According to the Mises Institute Quiz, "Are You an Austrian?" Here is the Austrian Economics School's answer to what caused the Great Depression and how effective the new deal is:
"The stock market crash of 1929 represented the most visible sign of a necessary correction in an economy artificially inflated by expansionary monetary policy. Instead of permitting liquidation, Hoover attempted to resuscitate the economy through interventionist measures, including protectionism, which only drove the economy further into depression. FDR built on this record and embarked on a disastrous course of central planning, which ended up saddling the US economy with bureaucracy and wage and price controls. The economy didn't fully recover until after WWII."
Does that sound right to you?  I know you agree both, with the New Deal being a failure, and that we didn't recover until AFTER WWII.  I'm a bit iffy about the increase in bureaucracy being a cause though:  we had FAR WORSE in the way of the size government and its interventionism & bureaucracies during the second half of the 1990s (right?), but we didn't have super-Great Depression severe economic conditions.

[MrBogosity]

First off, you say in it that the gold standard, by coining more money, would have solved the issue.
But from what I understand, the Fed WAS printing money (easy money policy) at some point to stimulate the economy.

That was before they got paranoid about inflation and hit the brakes on the money supply, causing the stock market crash and turning recession into depression. They then kept pulling money out like crazy because they thought it was the only solution.

Does that sound right to you?

As far as it goes, but it's incomplete. Unless you understand that the Fed went straight from putting money in the economy to pulling money out, you won't be able to reconcile any of what happened.

[Travis Retriever]

That was before they got paranoid about inflation and hit the brakes on the money supply, causing the stock market crash and turning recession into depression. They then kept pulling money out like crazy because they thought it was the only solution.

As far as it goes, but it's incomplete. Unless you understand that the Fed went straight from putting money in the economy to pulling money out, you won't be able to reconcile any of what happened.

So let me get this straight:
1929:  The Federal Reserve hit the breaks on the money supply because they feared runaway inflation.
1930-1931(ish):  They tried to increase the money supply figuring it would stimulate the economy, but...
after that, up until around 1933(ish): they actively began taking money out of the economy, reducing it as much as 30% by 1933?
And then they kept this strangle-hold on the money supply, not increasing it back to equilibrium (too little money) until WWII came about and they needed the printing press to fund the war effort, when in reality, they could have just not mucked around with the damn money supply and the interest rates, and just let the free market and the gold standard handle this and pretty much have avoided the whole damn catastrophe.

Does this sound right to you?

[MrBogosity]

Yes, and they also refused to step in as Lender of Last Resort when the banks started failing. It's worth reiterating that this was the main thing they were set up to do in the first place.

[Gumba Masta]

That was before they got paranoid about inflation and hit the brakes on the money supply, causing the stock market crash and turning recession into depression. They then kept pulling money out like crazy because they thought it was the only solution.