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Message:: [QUOTE="Tejas, post: 7694580, member: 84905"]That is true of course. I think what Mundell was getting at is this: In the late 1920s, the Fed was still a young and inexperienced institution that wielded enormous power. By sheer coincidence two of its most important policy-makers/advisors (one being Economist Allyn Young, the other being Fed chairman Benjamin Strong) died just when the Great Depression hit. Without these very capable people at the helm, the Fed took some very unfortunate decicisions, which made a bad situation worse and contributed to or even caused the famous bank failures that shocked Austria (Viennese Creditanstalt) and Germany into depression in 1931 and which gave Hitler a significant push to power. Of course, it was not just the Fed's doing. The Smoot-Hawley tariffs did their part to plunge the world economy into deep depression. In Germany the middle class was wiped out for the second time in 10 years (the first time being the deflation of 1923). Robert Mundell (Noble Prize Acceptance speech):"Had the price of gold been raised in the late 1920’s, or, alternatively, had the major central banks [Federal Reserve and Bank of England] pursued policies of price stability instead of adhering to the gold standard, there would have been no Great Depression, no Nazi revolution and no World War II." Isn't it amazing to think that had Allyn Young not died prematurely at the age of 52, he may have prevented the Great Depression, the Nazi revolution and WWII. Hitler's rise to power had many reasons, but without the Great Depression that was caused to a significant extend by a blundering Fed and the Hoover administration, his movement would likely never have extended much beyond Munich beer cellars. We will never know of course, but we should be aware of historical accidents and unintended consequences, when we make sweeping statements about guilt and punishment.[/QUOTE]

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