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'Blood and treasure': exiting the Great Depression and lessons for today

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  • Kris James Mitchener
  • Joseph Mason

Abstract

Although avoiding the policy mistakes of the 1930s helped define how policy-makers responded to the 2007--8 financial crisis and ensuing recession, policy applications to the recovery phase are less well understood. We draw on the experience of the US in the 1930s to shed light on exit strategies--movements back to institutional conditions associated with steady-state growth, including stable inflation and broadly non-interventionist credit- and capital-market policies. We describe how policy responses to the deflation and banking crises of the 1930s coloured the exit policy debate after the Great Depression. We show that a full exit from the Great Depression, defined as the point at which interventionist credit- and capital-market policies and institutions were wound down did not occur in the 1930s. It took until the 1950s for this to occur and for the Federal Reserve to regain its independence and return unfettered to its longer-run objectives. Copyright 2010, Oxford University Press.

Suggested Citation

  • Kris James Mitchener & Joseph Mason, 2010. "'Blood and treasure': exiting the Great Depression and lessons for today," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 510-539, Autumn.
  • Handle: RePEc:oup:oxford:v:26:y:2010:i:3:p:510-539
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    File URL: http://hdl.handle.net/10.1093/oxrep/grq025
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    Cited by:

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    2. Gabriel P. Mathy & Matthew Jaremski, 2016. "How Was the Quantitative Easing Program of the 1930s Unwound?," Working Papers 2016-01, American University, Department of Economics.
    3. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.

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