The Federal Reserve

By Daniel C . Munson

Financial historians have nearly all reached their own conclusions about the Great Depression of the 1930s . The convulsions of those difficult years offer fodder enough for all . Some have focused blame on the laissez-faire spirit of the 1920s that led to lax regulation , others on the excessive margin trading in stocks , still others on what they regard as inadequate monetary policy in response to the market crash .

Such analyses of events , understood with the advantage of hindsight , can easily overlook the confusion that consumed

President Franklin D . Roosevelt signs the Gold Bill on January 30 , 1934 , with George Warren in the back center . policy makers at the time . That angst and confusion — searing for those who lived through it and easily glossed over later on — should not be forgotten by historians .

The first year of the Franklin D . Roosevelt presidency provides an interesting example . Roosevelt met the economic problems of the early 1930s with his characteristic show of breezy self-confidence , but he occasionally confessed to , if not angst , at least some uncertainty . “ It is common sense to take a method and try it ,” he explained concerning the dismal state of the economy in a commencement address delivered during the 1932 campaign . “ If it fails , admit it frankly and try another . But above all , try something .”

One such problem that President Roosevelt met with this improvisational approach was the problem of low commodity prices , specifically low farm prices .

The collapse of farm prices , such as corn , wheat and hogs , in the early 1930s is a little remembered but critical fact of those early Depression years . The declines in the stock averages are well known and easily displayed on one ’ s computer , but the decline in farm prices — which had the pleasant upside of low grocery prices for the urban dwellers who write the history books — was in many ways more serious .

The years 1915 – 1920 had been prosperous for US farmers , a boom resulting from the drop in European farm output due to the Great War . From such peak levels , prices somewhat naturally declined in the 1920s : European farmers increased their output and prices gradually fell by roughly half from those peak levels over the course of

20 FINANCIAL HISTORY | Fall 2021 | www . MoAF . org