Sunday, January 6, 2008

Federal Reserve Admits Causing Great Depression

The more I read Ron Paul's articles and books, the more I learn about what really happened in American history.

It was some years ago that I heard Ron Paul interviewed on a financial radio talk say the Federal Reserve is a secretive, private secret banking cartel. I had been taught, in publicly funded schools, the Federal Reserve was part of the government. Ron Paul presented the real truth of the Federal Reserve, and the research I have done shows (again) that Ron Paul is correct.

I began researching the role of the Federal Reserve in the Great Depression, and was surprised to learn that Ben Bernanke (Federal Reserve chief) admits the Federal Reserve caused the Great Depression. Here are some quotes with links. The final quote is linked directly to the Fed's web site.


Bernanke relates several key actions by the Federal Reserve:
* The Fed began raising the Fed Funds rate in the spring of 1928, and kept raising them through a recession that began in August 1929. This led to the stock market crash in October 1929.
* When the stock market crashed, investors turned to the currency markets. At that time, dollars were backed by gold held by the U.S. Government. Speculators began selling dollars for gold in September 1931, which caused a run on the dollar.
* The Fed raised interest rates again to try and preserve the value of the dollar. This further restricted the availability of money for businesses, causing more bankruptcies.
* The Fed did not increase the supply of money to combat deflation.
* As investors withdrew all their dollars from banks, the banks failed, causing more panic. The Fed ignored the banks' plight, thus destroying any remaining consumers’ confidence in banks. Most people withdrew their cash and put it under the mattress, which further decreased the money supply.
Bottom line...thanks to the Fed, there was just not enough money in circulation to get the economy going again. Instead of pumping money into the economy, and increasing the money supply, the Fed allowed the money supply to fall 30%.




Chairman Ben S. Bernanke
At the The Credit Channel of Monetary Policy in the Twenty-first Century Conference, Federal Reserve Bank of Atlanta, Atlanta, Georgia
June 15, 2007
The Financial Accelerator and the Credit Channel

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In the interest of time I will confine the remainder of my remarks to the bank-lending channel. The theory of the bank-lending channel holds that monetary policy works in part by affecting the supply of loans offered by depository institutions. This concept is a cousin of the idea I proposed in my paper on the Great Depression, that the failures of banks during the 1930s destroyed "information capital" and thus reduced the effective supply of credit to borrowers. Alan Blinder and I adapted this general idea to show how, by affecting banks' loanable funds, monetary policy could influence the supply of intermediated credit (Bernanke and Blinder, 1988).
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Wikipedia:

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In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."[10]
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Presidential Candidate and Congressman Ron Paul, a member of the House Banking Committee, has criticized Bernanke for inflating the money supply and essentially taxing middle class savings by "printing" more money.[12]




Remarks by Governor Ben S. Bernanke At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois
November 8, 2002
On Milton Friedman's Ninetieth Birthday
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Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
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