Much of my understanding of the GD is based on Friedman’s teachings. The bank issue was the government not taking the promised action they wrote into law and forced the banks to sign on to it. That is government interference, not inaction.
Otherwise, you could blame all government interference as inaction. The only action the government takes on forced interference is to aid cronies.
The Fed is government appointed, but operates independent of the government once the positions are filled. And the Fed has always been largely made up of bankers and economists. Fed inaction caused the GD by shrinking the money supply rather than expanding it to support the banks need for liquidity.
And the GD was ended by the industrial output and manpower demands of WWII.
All this talk of Milton Friedman, is interesting because FR’s very own LS once had a enjoyable, debate with him.
“The bank issue was the government not taking the promised action they wrote into law and forced the banks to sign on to it. That is government interference, not inaction.”
It was inaction. Deer in the headlights.
The dominant figure at the Federal Reserve from the time of its founding was Benjamin Strong, the Governor of the Federal Reserve Bank of New York.
It was the Fed’s bad luck that Benjamin Strong died in 1928 on the eve of the Depression, leaving the Fed without a strong leader. They didn’t have someone equal to replace him as the Depression began unfolding and they did what a lot of committees do when faced by a crisis, nothing.