The Great Depression era can be divided into two parts. The initial decline lasted from mid-1929 to mid-1931. Around mid-1931, there was a change in people’s expectations about the future of the economy. This fear of reduced future income coupled by the Fed’s deflationary monetary policy resulted in a Mundell–Tobin effect. This further depressed the economy until Roosevelt stepped into office in 1932 and ended the gold standard, thereby ending the deflationary policy.
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A true understanding of the Great Depression requires not only knowledge of the U.S. monetary system but also the implications of the gold standard on its participatory nations. The gold standard made the involved nations interdependent on each other's monetary policy. Due to a fixed exchange rate, the only way to affect the demand for gold was through interest rates. For example, if interest rates were high in one country, then investors would have no reason to exchange currency for gold and the gold reserves would remain stable. However, if interest rates were low in a different country then its investors would elect to move their funds abroad where interest rates were higher. In order to stop this from happening, each nation within the gold standard union had no choice but to raise its interest rates in correspondence with its fellow nation. This interconnectivity of deflationary policy amongst so many nations resulted in the prolongation of the greatest economic downturn.
1929
U.S. decline in industrial production August: The recession begins, two months before the crash. Production falls by 20%.
October 24: Stock market crash begins.
October 25: Brief surge on the market.
October 29: 'Black Tuesday'. U.S. Stock market collapse.
November 1: The Federal Reserve begins lowering the discount rate from its 6% level.
Decline in the commodity prices.
1930
June 17: Smoot-Hawley Tariff Act passed.
September - December: First round of U.S. bank failures.
December: The Federal Reserve's federal funds rate reaches 2%, a record low.
1931
May: Creditanstalt, Austria's premier bank, goes insolvent.
May: The Federal Reserve's federal funds rate bottoms out at 1.5%.
May–June: Second U.S. bank failures / Change in people's expectation of the economy
July: Germany banking crisis
September 21: Britain leaves the gold standard.
September - October: Substantial amount of dollar assets are converted to gold in the US
September - December: The Federal Reserve increases the federal funds rate.
November - Summer 1932: Foreign trade restrictions / Imperial Preference
1932
April 2 - June: Government conducted open market transactions to increase money supply.
July: The Government discontinued open market operations.
November 8: Franklin D. Roosevelt elected President.
1933
April 5 - Executive Order 6102 or President Franklin D. Roosevelt issued, forbidding hoarding of gold coin, bullion and certificates, effective from May 1, 1933