Echoes Of 1937 In The Current Economic Cycle

It is not too early to ask how the present US business cycle expansion, already more than five years old, will end. The history of the last great US monetary experiment in “quantitative easing” (QE) from 1934-7 suggests that the end could be violent. Autumn 1937 featured one of the largest New York stock market crashes ever accompanied by the descent of the US economy into the notorious Roosevelt Recession. Should we take comfort from the fact that Friedman and Schwartz, in their epic monetary history, claim to have discovered the policy error by the Federal Reserve which was responsible for the 1937 denouement. And that today’s Fed officials are adamant about having learned their lesson? The short answer is no.

According to the now mainstream narrative, the strong economic recovery of 1935-6 could have continued for much longer if it had not been for the successive hikes in reserve requirements through late 1936 and early 1937, together with the sterilization of gold inflows from the start of that year. This meant the end of rapid growth in high-powered money supply. The trigger for these monetary policy changes was concerns within the Federal Reserve and White House about the intense speculative climate which had developed in equity and commodity markets during 1936, coupled with apparent upward pressure on goods prices. Friedman and Schwartz imply that these concerns were misplaced. And indeed, as regards the rise in goods prices, this was a benign recovery from a deep cyclical low-point in 1933 rather than something symptomatic of monetary inflation. It was, however, quite a different story for asset prices.

The monetary manipulations of the Roosevelt administration in combination with the Federal Reserve (dollar devaluation, monetization of subsequent huge

All the fed can do is postpone the inevitable. The markets, banks, overleveraged, auto makers, all of them, should have been left to go completely bankrupt and out of business. It would have been a painful year or two but the recovery would have been splendid.

This is stupid; comparisons to ANY economic cycle or stock market comparing slopes, tangents, trends and such is just really, really stupid.

Fact: the current market is digital, meaning, binary...either the money is pumped in by the unelected Fed, which is not part of the US government BTW, or it is not. If the pumping stops, whereby the Fed’s “friends” as GS, MS (that’s Goldman, Morgan Stanley) and others get their decimal places moved out so they can continue their investments OR NOT...or as my kids say, “or nah”. So, in sum, any past comparisons to markets are bunk. We either keep our money or lose like 80% of it in the blink of an eye.

Further, all companies have trimmed ALL FAT...there is nothing left. There is nothing to buy anymore except groceries...I expect the comsumerist stores...retailers...to really speed up and go out of business. We’ve all talked about Sears/Kmart here and others that are in the red quarter after quarter...0bummer better get out of office and we better win 2014 or combined with “healthcare” and such the Fed won’t even be able to keep their flaming bowling pins in the air.

No, I’m not crazy, I’m sure there are others thinking like this...beans and rice anyone? Boy, better buy hot sauce for them, too. (Sriracha since the owner is moving to TX...I like that guy)

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