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58
The 1932 Federal Reserve Annual Report proved that the Board of Directors didn't understand the magnitude of the problem. While they had good data, they were looking at the 1 interest rate, which was decreasing. They should have been looking the 2 interest rate, which was increasing. In addition to this, the Fed was concerned that buying bonds would do what (2 things)?
1) Nominal
2) Real
Reason 1) Fed was concerned that buying bonds would decrease gold supplies, possibly taking the Fed off the gold standard.
Reason 2) Fed was concerned that buying bonds would reduce the necessity for DR commercial borrowing, which would reduce interest payments to the Fed.
2) Real
Reason 1) Fed was concerned that buying bonds would decrease gold supplies, possibly taking the Fed off the gold standard.
Reason 2) Fed was concerned that buying bonds would reduce the necessity for DR commercial borrowing, which would reduce interest payments to the Fed.
Flashcard info:
Author: savhighsmith
Main topic: Economics
Topic: History of Economics
School / Univ.: UGA
City: Athens
Published: 11.12.2010