Notes

-in 1907, Knickerbocker Trust closed down, large bank
-banking panic ensued, banks used restriction of payments
-these phenomena caused a recession
-eventually panic subsided, payments could be resumed as usual,
-people angry because restriction of payments caused short decrease in output
-in 1913, federal reserve was formed, political pressure
-acted as lender of last resort, changing discount rates and loaning to banks in times of need, averted
recession w/printing press
-eventually just started open market operations
-ben strong, head of NYC branch of fed used OMO effectively and helped the economy, people said age of business cycle was over due to his effective interventions
-he died, struggle for power elicited, board in D.C took over
-in october 1929, stock market crash elicited mass economic panic, bursting of bubble
-NYC does what it usually does, bought bonds
-board wanted to flex power and stopped them
-money supply fell during this time
-bank runs then ensued, bank of america collapsed in 1930 if fed had not existed, no bank confidence in lender of last resort,
restriction of payments would have been used
-but nope, fed raised the discount rate
-economy could have recovered by 1931 if restriction of payments used, instead fed fucked up
-
-economic recovery began in 1908