Federal Reserve and the 1929 Market Crash

Sep 25, 2024

Lecture Notes: The Creature from Jekyll Island - Chapter 23: The Great Duck Dinner

Key Themes

  • Federal Reserve's Role in 1929 Crash: Examines how Federal Reserve policies contributed to the 1929 stock market crash.
  • Monetary Expansion for England's Benefit: Describes how U.S. monetary policy was used to assist England, leading to speculative bubbles.
  • Market Manipulation: Evidence that the Federal Reserve had foreknowledge and possibly orchestrated events leading to the crash.

The Duck Dinner Analogy

  • New England Farmer Story: Illustrates vulnerability through dependence, likening it to how easy credit and monetary policy led to dependency and eventual economic downfall.
  • Economic Parallels: Compares American public's reliance on credit to ducks dependent on the farmer’s corn.

Federal Reserve Act and Power Consolidation

  • Vague Language: The Act was intentionally vague to avoid debate and allow for broad future interpretation.
  • Amendments: Since inception, the Act has been amended numerous times, expanding Federal Reserve’s powers.
  • Public Perception: Initial aim to decentralize power from Wall Street was subverted by the dominance of the New York Reserve Bank.

The Role of Benjamin Strong

  • Influence and Connections: Strong was a key figure in the international banking system, closely linked with major banks and international bankers.
  • Federal Reserve’s Control: Strong’s leadership centralized the power of the Federal Reserve, particularly the New York branch.

Economic Policies and Their Impact

  • Inflation and Money Supply: The Fed’s policies led to inflation, meant to assist Europe, particularly England, at the cost of the U.S.
  • Speculative Boom: Easy credit led to a speculative boom in stocks and real estate.

Crash of 1929

  • Warnings Ignored: Despite warnings, the public remained optimistic about economic stability.
  • Collapse: Sudden stock market plunge wiped out many investors, but insiders with advanced warnings capitalized.

Aftermath and Federal Reserve Critique

  • Lingering Depression: Government interventions failed to resolve the economic crisis, leading to a prolonged depression.
  • Criticism of Managed Economy: Argues that centralized control of money supply leads to economic instability.

Natural Law of Economics

  • Inherent Temptation: Granting control over money supply leads to inevitable exploitation and wealth confiscation.

Conclusion

  • Summary of Key Events: Reflects on the Federal Reserve’s complicity in the crash and subsequent economic policies.
  • Call for Abolishment: Advocates for the dissolution of the Federal Reserve due to its destabilizing influence on the economy.

Note: These notes summarize the content of Chapter 23 from "The Creature from Jekyll Island" by G. Edward Griffin.