By Richard Walrath

 

The Federal Reserve which was created by an act of Congress in 1913 — I think I have the date right.   Before then, the United States went through a number of serious and long recessions and money panics for which Congress got a lot of blame, and rightly so, no doubt.  The idea of the Federal Reserve was to take the heat off Congress when there was economic trouble in the United States. 

Troubles came not too many years later when the stock market crashed in 1929 and ushered in the Great Depression, which lasted until World War II began.  The Federal Reserve was raising interest rates when it should have been lowering them and talking about the need for a balanced budget when it should have been encouraging more government spending.

Now we are engaged in another period of frothy times that Paul Krugman and Mary Pitt say are very similar to those just before the crash in 1929.  The stock market is down 100 points as I write this, and the question is, What is the Fed going to do about it?