What could the Federal Reserve have done to avert the Great Depression? And, once it had started, what should the Fed have done to stimulate the US economy? These are key questions in central banking at the start of the 21st century, just as they were in the 1930s. Their topical relevance has been reinforced by the Bank of Japan's difficulties in overcoming the prolonged malaise of weak demand and mild deflation in its economy since the mid-1990s. As will be shown later in this article, the