August 10, 1929 – THE FEDERAL RESERVE BEGINS TO TIGHTEN THE MONEY SUPPLY – LEADS TO GREAT DEPRESSION

1929 – THE FEDERAL RESERVE BEGINS TO TIGHTEN THE MONEY SUPPLY – LEADS TO GREAT DEPRESSION
The Federal Reserve sharply raises the interest rate it charges local banks to borrow money (called the “discount rate”). At the same time, it begins to sell its government securities (remember, the Fed is not part of the federal government, despite its name, but rather a largely private entity controlled by 12 reserve banks which are controlled by banks). These actions were the seeds, which led to the Great Depression – as limited money in circulation prevents business and commercial transactions from occurring.