That 1937 feeling all over again

Difference being the TARP and Stimulus did their job, averting a depression, and corporations, banks and the rich have record amounts of cash on hand. The problem is to get the do-nothing, block everything Pubs in congress to pass some of the jobs bill andtrade pacts languishing for no reason (except they want him to fail,the bought off a-holes)- and get the GD Pub a-holes to hire and loan...$%^&*#@ #$^&&%@#!! tyvm


so how is signing a trade pact that will send more jobs off shore going to create jobs.

Obama wants the GOp to approve more money we don't have to retrain people who are going to lose their jobs after this trade treaty is signed.

Hey, here's a concept, if a trade treaty is going to cause people to lose their jobs. Don't Sign It! And revoke some of those other ones that have caused us to lose jobs.
 
Listen to the macho, super-independant Pub Dupes whine and moan! Did banks, corporations, and the rich have RECORD amounts of cash on hand in the Depression? This is close to a manufactured stall, caused by do nothing, obstruct everything, fear monger 24/7, Un-American A-holes, and their silly dupes. Pass something fcs, bought off BS-ideology-mad jackazzes...
 
Listen to the macho, super-independant Pub Dupes whine and moan! Did banks, corporations, and the rich have RECORD amounts of cash on hand in the Depression? This is close to a manufactured stall, caused by do nothing, obstruct everything, fear monger 24/7, Un-American A-holes, and their silly dupes. Pass something fcs, bought off BS-ideology-mad jackazzes...

Yesss Yess!! Let your hate for American enterprise flow through you!

Dark_Lightning.jpg
 
Fer sure- can't spend money on training our obsolete workers- that's part of success in the global economy, and why Pubs are myopic morons...and let the country's infrastructure fall apart too. SAVE THE RICH!!! Idiocy...
 
Did banks, corporations, and the rich have RECORD amounts of cash on hand in the Depression?
No, the people themselves had hoarded cash (properly defined as coin of the realm) and FDR went around and stole it from them.

But now we have the Fed, which can just inflate the fiat currency into total worthlessness, in a vain attempt tor try and goad people into spending, rather than go around looting at gunpoint.
 
That 1937 feeling all over again | Reuters



I think Congress is going to have to actually - Oh, I don't know ... do their JOB??
The central bank did not rush to tighten monetary policy during the Great Depression, so Bernanke is an expert in historical inaccuracy. Immediately following the late October 1929 crash, the NY Fed began slashing rates. It kept periodically cutting until it got to 1.5%, which was the lowest rate in Fed history to that point.

Now it's true, in October 1931 the NY Fed abruptly changed course, because the Bank of England the month before had severed the pound's link to gold, and worldwide investors were fearful of a similar move by the US authorities. In order to stem the outflow of gold, the Federal Reserve did indeed find its hand forced and it had to jack up its rates.

But the point is that the Fed had implemented record "easy" policies from November 1929 through September 1931, some 22 months after the onset of the Great Depression. For nearly two years, the same easy money and big spending policies Keynesians advocate today were followed, and they failed miserably.

Furthermore, Throughout the period we are considering, the highest the New York Fed ever charged banks was 7 percent. And the only time it did that was smack dab in the middle of the 1920–1921 depression. That depression ended within a year. Interest rates were also raised to end stagflation and the economic disaster of the 70s and early 80s, and resulted in economic growth.

The Fed did little otherwise to keep the banking system liquid during the Great Depression. Bank reserves dropped by a third. The ratio of money in circulation to deposits was low in 1930. It then soared after the Bank of the United States failed in September of that year. People were hiding money in cans and their mattresses instead of sticking it in the banks.

It is not insignificant that the Fed raised interest rates in 1931. The rate increased from 1.5% to 3.5% to stem the outflow of gold when Britain went off the gold standard. That was a disastrous mistake and shouldn't be trivialized.

It should also be noted that the government ran fiscal deficits of 1%-2% of GDP up until 1932, when the deficit rose to 4%. For reference, George W Bush never ran a deficit less than 1.5% of GDP, and Reagan routinely ran deficits of 3% to 4%. So the "Keynesian" policies were hardly stimulative.
The Great Depression had been occurring for 22 months prior to the rise of the interest rates, and during that 22 month period interest rates were at the lowest point in NY Fed history. That period was also the most severe in terms of economic decline. Interest rates needed to rise. You also ignore the examples of the 1921 depression and the 70s. Interest rates were raised then as well. Why is it the result was economic growth and quick ends to the crises? The reason bank reserves were decreasing was because people were trying to convert their bank deposits into legal tender. During this time, the Fed continually tried to pump hundreds of millions of dollars into the economy but its policies failed. The free market forces were stronger as people continually pulled their money out of the system. People often criticize the Fed for tightening monetary policy in the last quarter of 1931. In fact, on balance the policy was still inflationary, since the Federal Reserve continued to increase controlled reserves.

In fact, the rate of 3.5% (allegedly tight monetary policy) was still lower than the rate of 4% the previous year. Throughout the rest of the Great Depression, monetary policy was largely inflationary. Reserve balances rose from $2.9 billion in January 1934, to $14.4 billion in January of 1941. And with this growth of member-bank reserves, interest rates declined to fantastically low levels.
http://mises.org/rothbard/agd.pdf (pg. 262)
 
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Banks collapsed. Money simply dissappeared. After the election was over that November, Hoover asked Roosevelt, who would not assume the Presidency until the next March, to jointly engage in a program to save the banks from collapse. Roosevelt turned his nose up and his back on Hoover's request. Over a hundred banks collapsed between that November and the next March. Money was so scarce in Salt Lake City, they used scrip instead, as a medium of monetary exchange.
 
Crusader Frank
"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it" Barack "Social Security Really is Bankrupt" Obama

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. ... It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies." -- Barack Hussein “Shovel-ready was not as … uh .. shovel-ready as we expected (laughs)" Failed Leader Obama "

Obama and his Administration were simply negotiating with the Republicans according to Obama Car Czar Ron Bloom's dictum: One method in particular, Bloom referred to as the "Dentist Chair Negotiating Method"
"How you keep the Dentist from hurting you" "You simply grab the dentist, with your hand, by that part of his anatomy closet to you while you lay in the chair, keeping it in a fim grip. If the dentist inflicts any pain upon you, you simply squeeze that part of the dentist's anatomy that much harder"
ie: the threat to withold Social security checks and Military pay.
 
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The central bank did not rush to tighten monetary policy during the Great Depression, so Bernanke is an expert in historical inaccuracy. Immediately following the late October 1929 crash, the NY Fed began slashing rates. It kept periodically cutting until it got to 1.5%, which was the lowest rate in Fed history to that point.

Now it's true, in October 1931 the NY Fed abruptly changed course, because the Bank of England the month before had severed the pound's link to gold, and worldwide investors were fearful of a similar move by the US authorities. In order to stem the outflow of gold, the Federal Reserve did indeed find its hand forced and it had to jack up its rates.

But the point is that the Fed had implemented record "easy" policies from November 1929 through September 1931, some 22 months after the onset of the Great Depression. For nearly two years, the same easy money and big spending policies Keynesians advocate today were followed, and they failed miserably.

Furthermore, Throughout the period we are considering, the highest the New York Fed ever charged banks was 7 percent. And the only time it did that was smack dab in the middle of the 1920–1921 depression. That depression ended within a year. Interest rates were also raised to end stagflation and the economic disaster of the 70s and early 80s, and resulted in economic growth.

The Fed did little otherwise to keep the banking system liquid during the Great Depression. Bank reserves dropped by a third. The ratio of money in circulation to deposits was low in 1930. It then soared after the Bank of the United States failed in September of that year. People were hiding money in cans and their mattresses instead of sticking it in the banks.

It is not insignificant that the Fed raised interest rates in 1931. The rate increased from 1.5% to 3.5% to stem the outflow of gold when Britain went off the gold standard. That was a disastrous mistake and shouldn't be trivialized.

It should also be noted that the government ran fiscal deficits of 1%-2% of GDP up until 1932, when the deficit rose to 4%. For reference, George W Bush never ran a deficit less than 1.5% of GDP, and Reagan routinely ran deficits of 3% to 4%. So the "Keynesian" policies were hardly stimulative.
The Great Depression had been occurring for 22 months prior to the rise of the interest rates, and during that 22 month period interest rates were at the lowest point in NY Fed history. That period was also the most severe in terms of economic decline. Interest rates needed to rise. You also ignore the examples of the 1921 depression and the 70s. Interest rates were raised then as well. Why is it the result was economic growth and quick ends to the crises? The reason bank reserves were decreasing was because people were trying to convert their bank deposits into legal tender. During this time, the Fed continually tried to pump hundreds of millions of dollars into the economy but its policies failed. The free market forces were stronger as people continually pulled their money out of the system. People often criticize the Fed for tightening monetary policy in the last quarter of 1931. In fact, on balance the policy was still inflationary, since the Federal Reserve continued to increase controlled reserves.

In fact, the rate of 3.5% (allegedly tight monetary policy) was still lower than the rate of 4% the previous year. Throughout the rest of the Great Depression, monetary policy was largely inflationary. Reserve balances rose from $2.9 billion in January 1934, to $14.4 billion in January of 1941. And with this growth of member-bank reserves, interest rates declined to fantastically low levels.
http://mises.org/rothbard/agd.pdf (pg. 262)

Interest rates didn't need to rise when there was deflation. Interest rates were raised to stem the outflow of gold, not because of inflationary pressure. Accumulated deflation during the Depression was something like 20% from 1929 to 1933. The fact that rates were lower than they were the year prior is not a reason to raise rates. They should have been lower than 4% in 1930. Raising interest rates when prices are collapsing is insane.

Reserves collapsed by a third from 1930 to 1933. The FDIC was created in 1933. THAT'S why bank reserves rose throughout the rest of the decade. Milton Friedman said that the FDIC was one of the main reasons why the Depression ended. Until that time, banks failed indiscriminately. There is a paper out there published in 2005 which analyzed something like 1500 bank failures in nine states during the Great Depression. The paper concluded that the banks that failed were as financially strong or stronger than the banks that survived. Of course, to dogmatic free market theoreticians, this shouldn't happen. The market should be able to discern between strong and weak banks. But that's not what happened.

Finally, the 1920 recession and the 1970s are not even close to being valid analogies to the Great Depression. The 1920 recession occurred because the government demobilized from the war and slashed spending. To show how important government spending was, absolute real corporate profits hit a record in 1916-17 that wasn't surpassed until the 1950s. So as the government demand was withdrawn from the economy, it collapsed. In the 1970s, there was inflation from the war, LBJ's Great Society and excessive money printing. The Great Depression was caused by an asset implosion which followed a build up in installment and corporate debt, then exacerbated by mistakes by the Federal Reserve.

FTR, I hope you quote things other than from the Austrian School. As a former adherent to the Austrian School with many books on my shelves from the likes of von Mises, Hayek, etc., and after spending nearly 20 years in the capital markets, I have come to the conclusion that even though the Austrians have some things correct, they are too rigidly dogmatic and difficult to take seriously empirically on all matters, similar to Marxists.
 
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The Fed did little otherwise to keep the banking system liquid during the Great Depression. Bank reserves dropped by a third. The ratio of money in circulation to deposits was low in 1930. It then soared after the Bank of the United States failed in September of that year. People were hiding money in cans and their mattresses instead of sticking it in the banks.

It is not insignificant that the Fed raised interest rates in 1931. The rate increased from 1.5% to 3.5% to stem the outflow of gold when Britain went off the gold standard. That was a disastrous mistake and shouldn't be trivialized.

It should also be noted that the government ran fiscal deficits of 1%-2% of GDP up until 1932, when the deficit rose to 4%. For reference, George W Bush never ran a deficit less than 1.5% of GDP, and Reagan routinely ran deficits of 3% to 4%. So the "Keynesian" policies were hardly stimulative.
The Great Depression had been occurring for 22 months prior to the rise of the interest rates, and during that 22 month period interest rates were at the lowest point in NY Fed history. That period was also the most severe in terms of economic decline. Interest rates needed to rise. You also ignore the examples of the 1921 depression and the 70s. Interest rates were raised then as well. Why is it the result was economic growth and quick ends to the crises? The reason bank reserves were decreasing was because people were trying to convert their bank deposits into legal tender. During this time, the Fed continually tried to pump hundreds of millions of dollars into the economy but its policies failed. The free market forces were stronger as people continually pulled their money out of the system. People often criticize the Fed for tightening monetary policy in the last quarter of 1931. In fact, on balance the policy was still inflationary, since the Federal Reserve continued to increase controlled reserves.

In fact, the rate of 3.5% (allegedly tight monetary policy) was still lower than the rate of 4% the previous year. Throughout the rest of the Great Depression, monetary policy was largely inflationary. Reserve balances rose from $2.9 billion in January 1934, to $14.4 billion in January of 1941. And with this growth of member-bank reserves, interest rates declined to fantastically low levels.
http://mises.org/rothbard/agd.pdf (pg. 262)

Interest rates didn't need to rise when there was deflation. Interest rates were raised to stem the outflow of gold, not because of inflationary pressure. Accumulated deflation during the Depression was something like 20% from 1929 to 1933. The fact that rates were lower than they were the year prior is not a reason to raise rates. They should have been lower than 4% in 1930. Raising interest rates when prices are collapsing is insane.
I never said interest rates needed to rise because of deflation. I did not even mention deflation. You are correct, interest rates were raised to stem the outflow of gold. But all of this is missing the point. Prior to 1931, Federal Reserve policy was inflationary. It was creating money and lowering interest rates. You can have both inflationary monetary policy and rising prices. I also did not say that because rates were lower a year earlier rates should be raised. What evidence do you have that rates should have been lower? The interest rate reflects time preference. If it is high, people are saving less. If it is low, people are saving more. Interest rates were held artificially low for a long period of time.

Reserves collapsed by a third from 1930 to 1933. The FDIC was created in 1933. THAT'S why bank reserves rose throughout the rest of the decade. Milton Friedman said that the FDIC was one of the main reasons why the Depression ended. Until that time, banks failed indiscriminately. There is a paper out there published in 2005 which analyzed something like 1500 bank failures in nine states during the Great Depression. The paper concluded that the banks that failed were as financially strong or stronger than the banks that survived. Of course, to dogmatic free market theoreticians, this shouldn't happen. The market should be able to discern between strong and weak banks. But that's not what happened.
The market did discern between strong and weak banks. All of the banks were pursuing the poor policy of fractional reserve banking. The FDIC simply gave people confidence that bad policy was actually ok.

Finally, the 1920 recession and the 1970s are not even close to being valid analogies to the Great Depression. The 1920 recession occurred as the government demobilized from the war and slashed spending. To show how important government spending was, absolute real corporate profits hit a record in 1916-17 that wasn't surpassed until the 1950s. So as the government demand was withdrawn from the economy, it collapsed. In the 1970s, there was inflation from the war, LBJ's Great Society and excessive money printing. The Great Depression was caused by an asset implosion which followed a build up in installment and corporate debt, then exacerbated by mistakes by the Federal Reserve.
All of those depressions were preceded by excessive money printing, leading to malinvestment. And if raising interest rates is so detrimental in once case, why was it beneficial in the others? You failed to explain that. Interest rates were raised in response to the 1920 depression. Why did this not result in a worse depression?

FTR, I hope you quote things other than from the Austrian School. As a former adherent to the Austrian School with many books on my shelves from the likes of von Mises, Hayek, etc., and after spending nearly 20 years in the capital markets, I have come to the conclusion that even though the Austrians have some things correct, they are too rigidly dogmatic and difficult to take seriously empirically on all matters, similar to Marxists.
That is meaningless. You have no way to prove whether or not you were once an adherent of Austrian economics or not. And at least I cited a source. You have cited absolutely nothing.
 
That 1937 feeling all over again | Reuters

(Reuters) - Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump.

He has been true to his word, keeping interest rates near zero since late 2008 and more than tripling the size of the Fed's balance sheet to $2.85 trillion. But cutbacks in government spending may end up having a similarly chilling effect on the economy, and there is little Bernanke can do to counter that.

I think Congress is going to have to actually - Oh, I don't know ... do their JOB??
If only Obama would let them....
 
What evidence do you have that rates should have been lower? The interest rate reflects time preference. If it is high, people are saving less. If it is low, people are saving more. Interest rates were held artificially low for a long period of time.

A fairly straightforward use of the Taylor rule would tell you that the rates were too high. Real GDP was about 60% of potential GDP.
 
Difference being the TARP and Stimulus did their job, averting a depression, and corporations, banks and the rich have record amounts of cash on hand. The problem is to get the do-nothing, block everything Pubs in congress to pass some of the jobs bill andtrade pacts languishing for no reason (except they want him to fail,the bought off a-holes)- and get the GD Pub a-holes to hire and loan...$%^&*#@ #$^&&%@#!! tyvm



The TARP Stabalized the financial industry. 350 Billion was spent under Bush and left the other 350 to be spent by OBAMA. The first 350 billion did the job leaving the Big 0 free to spend his half stabalizing the UAW.

The Failed Stimulus was squandered to prop up the failing unions in the states and when the payoffs ran out, the postponed crises took place in the same down economy that the Failed Stimulus avoided fixing in the first place.

Oh, yeah, the Toxic Assets are still there and have never been addressed.

The Cash for Clunkers program swept away the flow of used cars by destroying them and now the price of a used car is about 20% higher than it would have been.

Is there anything that these geniuses cannot screw up?
 
I never said interest rates needed to rise because of deflation. I did not even mention deflation. You are correct, interest rates were raised to stem the outflow of gold. But all of this is missing the point. Prior to 1931, Federal Reserve policy was inflationary. It was creating money and lowering interest rates. You can have both inflationary monetary policy and rising prices. I also did not say that because rates were lower a year earlier rates should be raised. What evidence do you have that rates should have been lower? The interest rate reflects time preference. If it is high, people are saving less. If it is low, people are saving more. Interest rates were held artificially low for a long period of time.

This is the evidence that interest rates were too high.

fredgraph.png


Real rates were double digits. Yet the Fed raise interest rates to stem the outflow of gold. Milton Friedman was correct. This is what turned a brutal recession into the Great Depression.

The market did discern between strong and weak banks. All of the banks were pursuing the poor policy of fractional reserve banking. The FDIC simply gave people confidence that bad policy was actually ok.

This is ideology not grounded in empirical reality.

http://www.umbc.edu/economics/seminar_papers/carlson_924.pdf

All of those depressions were preceded by excessive money printing, leading to malinvestment. And if raising interest rates is so detrimental in once case, why was it beneficial in the others? You failed to explain that. Interest rates were raised in response to the 1920 depression. Why did this not result in a worse depression?

This, again, is ideology, not empiricism. There was not any "malinvestment" building up from both WWI and from the 70s, or at least no more than usual. Both recessions were different from each other and from the Great Depression, which was a result of malinvestment as installment, bank and corporate debt funneled into the stock market.

Rising interest rates were a cause of the 1920 recession.

That is meaningless. You have no way to prove whether or not you were once an adherent of Austrian economics or not. And at least I cited a source. You have cited absolutely nothing.

Whether or not you believe it is irrelevant.

I would cite Friedman's Monetary History of the United States first and foremost.
 
Controlling interest rates is what causes all these crises. If Ben Bernanke wanted to grow the economy, he would burn down the Federal Reserve and quit.

Before the Fed existed we never had a single financial crisis! Not one! EVAH!1!

Of course, that's why we got the Federal Reserve in the first place. People were tired of all the financial crises and deflation of the previous 40 years.
 

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