Credit Contraction and Monetary Policy During the Depression

Throught-provoking and highly useful data deck from John Kemp at Reuters. He does a lovely graphical job of summarizing some of the most important numbers in banking and credit, rates, commodities, and energy from the 1922-1952 period.

There is much to contemplate here. I will try to return to it later this weekend when I have some more time.


  1. Great set of data! AS Bernake is a great Depression scholar I guess this data is the basis for lots of his thoughts. So whatever happens here the Fed is clearly not going to make the same mistakes again (hopefully the ones it makes do not have impacts as severe) and he clearly isn't with all the quantative easying. A couple of things stand out for me.
    1. I did not know that the Fed raising reserve requirments triggered the second downturn in 1937-38. This will be tricker this time with all the extra liquidity pumped in but I guess they won't do anything so abrupt this time.
    2. It seemingly took at least a decade for trust in banks (as opposed to holding cash) and a willingness to lend and take on debt to improve. Similarly the stock markets role in raising equity capital basically ceased.
    3. I took a very long time (3-4) years for the banking crisis to peak – after this passed the real economy recovered dramatically.


  2. Paul Kedrosky says:

    Well, yes, but John's data was avowedly about the banking system andcredit. Kind of hard to avoid the banks when you're talking about thebanks.