The Analysis Of The Main Causes Of The Invalid American Monetary Policy During The Great Depression

The outbreak of the great depression shocked the world.Many scholars had done research and had made some substantial progress.In spite of this,the study of the great depression cannot be finished.The experience and lessons are waiting for us to dig.Few people has done research on the reasons of the invalid monetary policy during the great depression.From this Angle,this article try to analyze the main cause of the invalid monetary policy from the point of commercial Banks.Before discussing the internal link between the collapse of commercial bank and the ineffectiveness of monetary policy,it is necessary to understand the three prerequisites of the Great Depression: first,the United States is under the demand constraint condition.this economic situation doomed that inadequate aggregate demand will appear in the United States.Second,before the outbreak of the great depression,the national income distribution is seriously injustice.And the law of diminishing marginal propensity to consume is not suitable for low and middle income earners,which contributed to the situation of insufficient aggregate demand.The third is the prevalence of consumer credit in the United States.The widely use of consumer credit covered up the phenomenon of unfair distribution in the United States,and made the demand boom.But it had condition---the bank system guaranteed payment by installment.Once the capital of commercial Banks recurred jam,the strong demand will immediately halt.At last the United States will be evolved into the great depression.Furthermore just because the consumer credit plays an important role in stimulating aggregate demand,the status of commercial Banks becomes even more important.In addition,commercial banks,an important derivative platform,play an indispensable role in the monetary policy transmission mechanism.Each kind of monetary policy transmission channel can not be separated from commercial banks.So whether commercial banks are healthy or not is directly related to the operation of the whole economy.What's more when the the great depression came,the commercial bank credit fund was difficult to be recovered,and the paralysis of the stock also made commercial Banks hardly to withdraw money from the capital market.According to these two effects,the commercial Banks could not escape from collapse,and lost in the disaster.The collapse of the commercial Banks is not only related to the operation of the macro-economy,but to whether the authorities can be smoothly to use monetarypolicy to save the economy.From the conduction of commercial banks can be seen that the collapse of commercial banks block the transmission channels,Which leads to the invalidity of monetary policy.Moreover,even if the commercial banks are operating normally,monetary policy may not be effective.Because from the perspective of money multiplier,if The Monetary authorities want to release money through commercial banks,then the excess reserves of commercial banks must be appropriate,or too much excess reserves can only make monetary policy discount.Therefore,from the above analysis,the paralysis of commercial banking system will inevitably lead to the invalidity of monetary policy...