Originally posted by Capitalizt
No..that would be fed intervention ;)
The money supply was expanded well beyond the country's gold reserves in the 20s. That's part of what led to the bank runs and it's certainly what allowed such ridiculous amounts of margin credit to be extended to investors.
Now I know you don't know you'r talking about! You got figures for that "money supply was expanded" statement? Because I'v got something which says the COMPLETE opposite. Discounting inflation due to World War I, the money supply hardly changed throughout the 1920's. A paltry 0.15% inflation 1920-1929...
You blame everything on inflation and the Fed. What a ridiculous hypothesis.
pkcRAISTLIN
quote:
Originally posted by Krypton
Now I know you don't know you'r talking about! You got figures for that "money supply was expanded" statement? Because I'v got something which says the COMPLETE opposite. Discounting inflation due to World War I, the money supply hardly changed throughout the 1920's. A paltry 0.15% inflation 1920-1929...
You blame everything on inflation and the Fed. What a ridiculous hypothesis.
That's just his regurgitation of austrian school rhetoric. The position has absolulely no influence with real economists.
quote:
Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continuous crisis in the banking system.[19][20]
In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933. Friedman argued[21] that the downward turn in the economy, starting with the stock market crash, would have been just another recession. The problem was that some large, public bank failures, particularly that of the New York Bank of the United States, produced panic and widespread runs on local banks, and that the Federal Reserve sat idly by while banks fell.
He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.[22]
With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.[23]
Capitalizt
inflation =/ money supply krypt
They aren't linked on a 1:1 basis. As you know money supply in America has been SOARING over the past 6 months.. The balance sheet of the fed has doubled, but we haven't felt any inflation yet due to the continued collapse of the bubble. I expect something similar happened after WW1 in your example. There were several factors depressing the economy (loads of unemployed troops coming home causing a glut of unemployment, etc). Money supply growth does tends to foster excessive credit expansion an easy lending standards at banks over time..but there is always a lag period.
Krypton
quote:
Originally posted by pkcRAISTLIN
That's just his regurgitation of austrian school rhetoric. The position has absolulely no influence with real economists.
It's hard to argue with someone who doesn't even know inflation is a normal function of capital markets. I mean, what more is there to say?
Krypton
quote:
Originally posted by Capitalizt
inflation =/ money supply krypt
They aren't linked on a 1:1 basis. Inflation is a symptom of money supply growth but there is always a lag period and it doesn't happen instantaneously. As you know money supply in America has been SOARING over the past 6 months.. The balance sheet of the fed has doubled, but we haven't felt any inflation yet due to the continued collapse of the bubble. I expect something similar happened after WW1 in your example. There were probably several factors depressing the economy (loads of unemployed troops coming home causing a glut of unemployment, etc). Money supply growth does tends to foster excessive credit expansion an easy lending standards at banks over time..but there is always a lag period.
So 10 years isn't enough time for the supposed increase in money supply to show up as inflation? So what is enough time since 10 years of data is just not enough? Because I think the "Austrian School" explanation is pure bull and my data figures prove it.
The difference between now and 1929-1933 is the Federal Reserve is actually doing something about this crisis. No their balance sheet is much higher now. They'r working their asses off trying to stave off the second Great Depression.
Capitalizt
Oh krypt you're making me cry.. Actually it was only 5-6 years of loose lending that precipitated the crash, since the previous recession ended in 23. I've been googling my ass off and can't find a chart for you, but if memory serves the fed's balance sheet grew from $1 billion to $1.8 billion in the mid 20s. I know that sounds like peanuts today but it was a good amount back then and once you compound that with the low reserve requirements they had for banks, the actual money supply grew much more than that...far FAR beyond the gold reserves of the nation. I checked trusty wikipedia and found this: http://en.wikipedia.org/wiki/Wall_S...ic_fundamentals
quote:
August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying. Over $8.5 billion was out on loan,[21] more than the entire amount of currency circulating in the U.S.
Excessive debt and credit expansion causing a dangerous asset bubble...shocking I tell ya...shocking! We still haven't learned have we?
gallantrybot
quote:
Originally posted by Capitalizt
Excessive debt and credit expansion causing a dangerous asset bubble...shocking I tell ya...shocking! We still haven't learned have we?
The total outstanding debt of our country is like 78 TRILLION DOLLARS!!
That's a credit bubble which is hard to even fathom. :nervous:
Capitalizt
quote:
Originally posted by gallantrybot
The total outstanding debt of our country is like 78 TRILLION DOLLARS!!
That's a credit bubble which is hard to even fathom. :nervous:
Lets be honest..The real debt today is "only" $11.05 trillion..lol
I think your number is what our unfunded obligations total over the next 50 years. Our debt will reach that level unless we radically raise taxes or cut spending.
gallantrybot
quote:
Originally posted by Capitalizt
Lets be honest..The real debt today is "only" $11.05 trillion..lol
I think your number is what our unfunded obligations total over the next 50 years. Our debt will reach that level unless we radically raise taxes or cut spending.
My number was the total, yes.
i.e. Social Security, Medicare, consumer credit, home mortgages, etc.
Edit: I had posted this it the America's Debt = "We're Screwed!" thread but here it is again. And yes, I know that Glenn Beck is something of an alarmist but seriously, isn't this something that we should truly be alarmed about?
Groundhog Boy
quote:
Originally posted by gallantrybot
My number was the total, yes.
i.e. Social Security, Medicare, consumer credit, home mortgages, etc.
Edit: I had posted this it the America's Debt = "We're Screwed!" thread but here it is again. And yes, I know that Glenn Beck is something of an alarmist but seriously, isn't this something that we should truly be alarmed about?
Glenn Beck & Stephen Moore, what a duo....
:rolleyes:
And you can't include future guarantees. It's not debt until it's accumulated, which it hasn't if we're not paying that whole $55 Trillion chunk. For all you know, we might get nuked and just think of how that would impact SS and Medicare if everyone's dead? Also, from that video, you can't tell whether they're adding in funding to those programs or the investment returns on those contributions, and if so, at what level of contribution since you'd be trying to predict future wages that would be hit by FICA.
Lastly, I realize that it sounds all apocalyptic that our "debt," as you call it, is the size of 1 year's world GDP, which sounds really intimidating until you realize that the US alone is over 1/5th of that number.
Krypton
quote:
Originally posted by Capitalizt
Oh krypt you're making me cry.. Actually it was only 5-6 years of loose lending that precipitated the crash, since the previous recession ended in 23. I've been googling my ass off and can't find a chart for you, but if memory serves the fed's balance sheet grew from $1 billion to $1.8 billion in the mid 20s. I know that sounds like peanuts today but it was a good amount back then and once you compound that with the low reserve requirements they had for banks, the actual money supply grew much more than that...far FAR beyond the gold reserves of the nation. I checked trusty wikipedia and found this:
First you blame the Fed, then you blame inflation, and when that failed, now you blame only one of the many causes of the Great Depression. And with no data to back it up. One of the reasons so-called Austrian school "economists" are rarely ever taken seriously. Do you have a source for this $1 billion to $1.8 billion Fed balance sheet increase, and for what time period? If we are to blame the Fed, it's that they did far too little. Bernanke said, "won't let it happen again," and from what I'v seen, he's kept his word.
Oh and one other thing...the quote you posted...
quote:
August 1929, brokers were routinely lending small investors more than 2/3 of the face value of the stocks they were buying. Over $8.5 billion was out on loan,[21] more than the entire amount of currency circulating in the U.S.
NO CITATION!!!!!!!!!
Capitalizt
ok krypt, I just spent a good 10 minutes searching high and low and couldn't find any charts on the amount of credit extended to investors in the 20s. I'm happy to be proven wrong on this, so if you can find the official data anywhere, please post it (and edit the wikipedia page while you're at it). ;)
The closest info I could find was on page 138-148 of Americas Great Depression, the e-book I posted in the other thread. The data shows a 7.7% annualized increase in the money supply from 1921-1928..not hyperinflation, but still nothing to scoff at. Just as now however, the fed had more stimulative tools in it's arsenal back then than money supply alone. Combine the 7.7% growth with the low bank reserve ratios (3-12% at the time) and loose margin requirements (only around in 10% in many cases as you said earlier) and we had a recipe for large amounts of credit expansion which led to the speculative boom and bust.. And of course you are right about Bernanke not repeating the mistakes of the past. He's not going to do what was done after the crash of 29' and tighten credit. On the contrary, he (and Obama too for that matter) are throwing every inflationary tool including the plumbing behind the kitchen sink at this problem. Everything he has said and written indicates than when in doubt he will always err on the side of monetary easing. There is no frakkin way we will have deflation so long as every government and central bank around the world is on this path.. They will win the battle against deflation. The sheer amount of money being spent/loaned/created guarantees that much..
Check this out, the total commitments by the fed/treasury so far.. http://www.bloomberg.com/apps/news?...tCA4&refer=home
:eek: :eek: :eek:
This really is a staggering amount of stimulus. My only argument is that the unintended consequences from this down the line will be tremendous. All this new money sloshing around is baking another speculative boom into the pipeline now, and I'm afraid Bernanke will leave the easy money spigot open too long just as was done in the late 90s and early-mid 2000s. Maybe he is smarter than every previous fed chairman and will know precisely when to choke off the stimulus to prevent any problems without causing another recession. Maybe he really can time things perfectly..but if history is any guide, I doubt it. $12.8 trillion is a LOT of stimulus to unwind and I doubt it can be done in an orderly or timely fashion. Oh well...We'll know in a couple years won't we?
P.S. I'm leaving town for the next 6 days so don't think I'm bitching out if I don't respond to any posts here for a while. :) Have a good week.
