How the US Treasury Avoided Chronic Deflation by Relinquishing Monetary Control to Wall Street

Prior to the 1907 financial crisis, the Unites States Treasury performed nearly all the functions that later were assigned to the Federal Reserve after its creation in 1913. The political intent of the Federal Reserve--and indeed, the effect--was to shift control over money and credit away from Washington to Wall Street and other financial and business centres. This aim was voiced already in the 1830s by the Whigs in their fight with Andrew Jackson. The broad economic aim was to prevent a recurrence of the monetary deflation that had long held back the US industrial development, at first after Jackson's war on the Second Bank in the 1830s, and again after the civil war as the government forced prices for gold and other commodities back down to their pre-war levels.