Doctoral Dissertations

Paul J. Kubik

Date of Award

5-1989

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Economics

Major Professor

Anne Mayhew

Committee Members

Hans Jensen, Paul Davidson, Cathy Matson

Abstract

The purpose of this dissertation is to examine the ways in which officials of the Federal Reserve System responded to the development of consumer credit and the institutions extending it during the interwar period and to determine the influence these views had on the forma tion of monetary policy, particularly in the course of the Great Depression. Direct evidence from the minutes of the interwar Federal Reserve Board meetings, the minutes of the open market policy committee meetings, and various Federal Reserve publications are utilized in addressing this issue. The volume of consumer credit was insignificant at the time of the writing of the Federal Reserve Act. The 1920's, however, witnessed a rapid increase in the amount of credit extended to the household for consumption. Outstanding consumer debt per household (constant $1972) increased from $237.15 to $540.28 between 1919 and 1929. The rapid development of consumer credit in the 1920's generated a significant amount of social debate. Individuals from the banking, business, labor and intellectual communities, as well as Federal Reserve System officials, participated in this debate. Analysis reveals that the attitudes of Federal Reserve officials paralleled others. Despite this initial show of concern the interwar development of consumer credit did not directly influence the policies pursued by the System during this period. Federal Reserve System officials did not appreciate the importance of consumption and consumer credit in the 1920's and early 1930's. Consequently, they did not act so as to limit the drastic reduction in consumption spending during 1929-33.

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