Deflation
Deflation occurred periodically in the U.S. during the 19th century (the most important exception was during the Civil War). This deflation was at times caused by technological progress that created significant economic growth, but at other times it was triggered by financial crises — notably the Panic of 1837 which caused deflation through 1844, and the Panic of 1873 which triggered the Long Depression that lasted until 1879. These deflationary periods preceded the establishment of the U.S. Federal Reserve System and its active management of monetary matters. Episodes of deflation have been rare and brief since the Federal Reserve was created (a notable exception being the Great Depression) while U.S. economic progress has been unprecedented.
Great Depression in the United States
At the beginning of 1933, the last few weeks of Hoover's term, the American financial system was paralyzed. The Great Depression was extended by the interventionist policy for four years. Bank crisis caused the serious deflationary pressures. For this phenomenon, Hoover still wanted to stop it. In fact, the worst period of 1932 – the Great Depression had passed, but the recovery was slow and weak. During the financial crisis of 1933 that culminated in the banking holiday in March 1933, a lot of gold flowed out from the Fed, some of them flow out to individuals and companies in the United States. This domestic loss occurred because individuals and businesses like to deposit metal gold into bank deposits or banknotes, some gold flows to foreign countries, and this external loss occurred because foreign investors were worried about the depreciation of the dollar. Roosevelt understands that the traditional political and financial policy cannot save the United States from the "disaster years", he pursued the "New Deal" to attempt to make up for the United States by administrative means. In the spring and summer of 1933, the Roosevelt government suspended the gold standard. The Emergency Banking Act gave the President the power to control international and domestic gold sports. It also gave the treasury secretary the power to surrender of gold coins and certificates. On April 20, President Roosevelt issued a formal announcement of the moratorium on the gold standard. The announcement prohibited gold exports, and prohibited financial institutions from converting money and deposits into gold coins and ingots. The action prevented the gold outflow. Soon, the Roosevelt government weakened the connection with gold once again. Thomas amendment to the Agricultural Relief Act to the gave to the President power to reduce the dollar's gold content by as much as 50%. The President Roosevelt also used the silver standard instead of gold to exchange dollars, it determined by the price of the bank. In April 1933, Roosevelt decided to abolish the gold standard through the New Deal. He abandoned this traditional monetary policy is mainly due to the big crisis to the original monetary policy failure. And the purpose of his action is to prohibit all exports of gold except for foreign countries, so that the United States can maintain an equal monetary base with the vast majority of countries. The Hoover government stubbornly insisted on using the "sound money" policy who against deficit spending and state relief that only make the economic crisis worsen. Because of this situation Roosevelt forced the implementation of inflation, and used the federal deficit spending to promote employment to enforce relief. The abandon of the gold standard made the Wall Street stock prices quickly increased, Wall Street's stock trading was exceptionally active, with a total of 5 million shares delivered on a day, which is the most active day in the past six months.