Econ 113b Midterm 2

Federal Reserve

• developed monetary policy to replace gold standard

• central bank

• promote stable and healthy economy 

• monetary policy: control money supply and interest rates

What did progressive reformers push for?

consumer protection, labor standards, controlling corruption, administrative state expansion 

Milton Friedman

• argued for a broad simple tax base and low rates

• believed the feds had to maintain a stable money supply growth, Great Depression caused by feds

• free market capitalism, limited government

• monetarism: inflation caused by too much growth in money supply

• bank should follow steady rules

• criticized New Deal for slowing down recovery b/c of the regulatory intervention

The Great Depression

• international gold standard constraints

• speculative bubbles

• banking fragility → collapse in deposit → deflation

• no federal deposit insuranace

• fiscal policy too small

FDR (Franklin Roosevelt)

• views on New Deal were viewed negatively by classical liberals

• create series of programs to fight Great Depression

• created new deal: expanded federal spending, agencies, labor protection, social insurance 

• FDIC: insures money, Social Security: long term welfare

• used to prevent future collapses

Woodrow Wilson

• strengthened federal power to regulate economy

• created Federal Reserve

• promoted free trade, reduction of arms

Andrew Carnegie

• founded Carnegie Steel Company, largest steel producer in the world

• believed rich have moral duty to use their wealth to help society

• used most of his wealth for education, universities and libraries

Rockefeller

• founded standard oil and aggressively controlled oil refining and transportation

• master of horizontal integration, bought out competitors to control market

• criticized as symbol of monopoly power

• Sherman Antitrust Act used against them, broke it down into different companies

Hoover

• believed in limited government intervention

• did not want to give direct federal aid to individuals

• blamed for Great Depression

Benjamin Strong

• stabilize US banking system during and after WWI

• supported open market

• low interest rates to fight deflation

• wanted an active central bank

• established Fed independence and effectiveness