Some of us might beg to differ. Here is M3 (broad money, not just cash and checking, projected from Federal Reserve data since the Fed stopped publishing the actual number.
Posted on 11/20/2007 11:28:46 AM PST by fweingart
In March 1929, the Harding-Coolidge era came to an end. The eight years had witnessed the greatest peacetime prosperity of any nation in history: America in the Roaring Twenties. Early that March, Calvin Coolidge handed the presidency over to Herbert Hoover, who had just pulled off a third straight Republican landslide.
"I do not choose to run," said Coolidge, who could easily have won a second full term. Silent Cal went home. Hoover, whom he privately derided as "Wonder Boy," presided over the Crash of '29 and the first three years of the Great Depression.
History holds Harding, Coolidge and Hoover responsible for the Depression, with Treasury Secretary Andrew Mellon, and Reed Smoot and Willis Hawley of Smoot-Hawley fame, as accessories. As Voltaire observed, history is a pack of lies agreed upon.
Two men debunked the myth that the low-tax, high-tariff policy of the 1920s brought on the Depression. The more famous is Milton Friedman, who proved to the satisfaction of a Nobel Prize committee that the Depression was a monetary phenomenon. The Fed had opened the sluices, and the money had swamped the stock market.
When Wall Street crashed, there came a run on the banks by men who had bought on margin, a depositors' stampede, a bank collapse, a wipeout of uninsured savings and the loss of a third of the money supply, lifeblood of the economy. The Fed never gave the nation the needed transfusions. Hoover and FDR, misdiagnosing the crisis, raised taxes and wrote up new regulations, which was like putting a body cast on a patient in shock from the loss of a third of his blood
The Smoot-Hawley myth, repeated by John McCain in the Detroit debate, was demolished by Alfred Eckes of Ohio University, Reagan's man at the FTC and America's foremost authority on the history of trade and tariffs, in his 1995 "Opening America's Markets."
The point of this brief history: The recent hand-off from Alan Greenspan, the maestro of the Global Economy, to Fed Chairman Ben Bernanke may turn out to have been a lateral far behind the line of scrimmage, leaving Bernanke holding the bag for a recession for which he is no more responsible than was the hapless Hoover.
Last week, the stock market saw 4 percent of its value wiped out. Oil reached nearly $100 a barrel. The dollar fell to record lows against the Canadian dollar and the euro. The price of gold was $850 an ounce, signaling inflation and a worldwide lack of confidence in the Fed's ability or determination to defend the world's reserve currency.
The Chinese, with $1.4 trillion in reserves, perhaps 80 percent in dollar assets, indicated they may dump dollars and move into euros. Merrill-Lynch took an $8 billion hit. Citibank is signaling massive losses from its subprime mortgage debt. General Motors reported an operating loss of $1.6 billion for the quarter and a whopping $39 billion charge that is among the biggest profit hits ever reported
Where does this leave Bernanke? On the horns of a dilemma.
Exposure of all that subprime debt going rotten on the books of our biggest banks, the staggering losses being reported, the inability of homeowners to refinance or borrow any further against their equity, the credit crunch -- all argue for an easy money policy to get capital back into the economic bloodstream.
Thus the Fed has cut interest rates from 5.25 percent to 4.5 percent, thus the howls for deeper cuts, thus the market anticipation of another cut, though the Fed has said no more.
But the Fed is responsible not only for the national economy. It is responsible for defending the dollar, which represents the real savings and wealth of the nation. And that dollar has lost more value in seven years than in any similar period in modern history. A euro, worth 83 cents the year Bush was elected, has risen in value to $1.47.
As the dollar sinks, exporters may cheer rising sales, but at home we will soon find that the prices of all those imported goods from Europe and Asia down at the mall are starting to rise. U.S. soldiers, diplomats, tourists and businessmen overseas are already feeling the pain of a falling dollar.
If a recession is generally a sign the Fed should loosen up, a run on the dollar is a sign the Fed should tighten by raising interest rates to make dollars and dollar-denominated assets more attractive.
But the Fed's raising of interest rates would push up the rates on mortgages, credit cards and auto loans, and push millions of marginal folks into bankruptcy and the country into recession, a disaster for the Republicans.
But, given their free-trade fanaticism and free-spending ways, that fate would not be undeserved. Say a prayer for Ben Bernanke. He may have to eat the football that scrambling quarterback Greenspan tossed to him far behind the line of scrimmage.
I will be getting an inheritance check in a week or so. Nice check, but I don’t like the way I’m getting it. In any event, I will be taking all of it and buying Euros as a hedge. I plan next year to start moving my savings and everything left over after I pay bills into Euros. I’m also going to drastically cut back spending everywhere. There is no sense in holding onto a currency that is falling and with no bottom in sight. I worked too damn hard for my money to see it dwindle away in value and I’m getting old. If it’s a global economy, I’m going global to survive.
Some of us might beg to differ. Here is M3 (broad money, not just cash and checking, projected from Federal Reserve data since the Fed stopped publishing the actual number.
Am I the only one frustrated as heck....no, mad as H... at the under the radar, going around the American people while plotting to give away our sovereignty...I’m of the mind that any action that earth shattering, life changing for future generations, should be put before the American people for a VOTE. Well of course that’s not going to happen, because we would NEVER agree to that...so they sneak around, lying, trying to keep us in the dark...I’m just sick about what they are doing, and have done....it’s all about the money, as usual...
Are you confusing 1923 Germany with 1929 US?
Don't forget the impact of ethanol and biofuels production.
The sub-prime ARM resets haven’t peaked yet. From the charts it appears Dec-Jan will be the peak. Not trying to push doom and gloom, but the following months won’t exactly be sweetness and light, either. FYI.
I could be mis-remembering, but I think Lindbergh even flew on a few combat missions. Not a lot, but that doesn’t really matter if you stop and think about it.
“I could be mis-remembering, but I think Lindbergh even flew on a few combat missions. Not a lot, but that doesn’t really matter if you stop and think about it.”
*************
I’m not that old to remember, but I “READ” :) that Roosevelt prevented Lindbergh from being able to join the army-air core.
it clearly has a similar effect in speeding up change and has to be changing the path money takes through the economy in a analogous way (with the stock market recognizing this fact by pumping up the value of Amazon, Google, etc)...
...the Internet must be hugely disruptive for some market niches that once had it made (Blockbuster anyone?)*****
No, the internet is not anywhere close to the magnitude of change in the 20’s. E.g., Amazon did not put Borders out of business, they are still opening new stores and are profitable.
Currently, the government measures the increases in productivity. If you look at the productivity increase during the internet boom, you don’t see any huge jumps. The internet did not put many brick and mortar stores out of business.
I think the computer, itself, would be a better example. But it took 50 years for computerization to be phased in. I can remember using time sharing, on a main frame, back in the late 60’s for some manufacturing research. In terms of our total economy, the computer and/or the internet has been a very incremental change.
BTW, Blockbuster is still around and doing ok. Not as well as its hay day, but still pretty good. I was in the video rental business back in the early 90’s and it was not the internet that hurt it as much as satellite tv. Dish Network and Directtv hurt video rentals much more than Netflex. If you want to watch a movie “tonight”, you have pay per view or your local DVD store today.
The Great Depression was pretty much centered in the USA. In the eastern hemisphere, land was scarce so the huge increases in farm productivity did not occur. A tractor made it easier to farm 100 acres, but you could not expand to 400 acres.
Thank you for giving the idea some consideration. Not many people do.
He still could have flown missions as a civilian, it wasn’t unheard of!
Increased M3 rates in other countries have been as high or even more frequently higher than the US so that is bunk.
How much is this as part of your budget? The computer I wanted last year for $1000 I can buy now for $399. That savings would buy me 741 dozen eggs at the new price! Even taken over a 5 year period, that'd pay for 148 dozen eggs a year for 5 years. BTW take a look at a dozen egg prices in say 1980. Put in 3% inflation and see what it would be today.
Fuel & food ARE included in the CPI. The "Core" CPI does not include it. CPI is currently running at 3.5 vs 2.1% fore core. Clinton added other factors to the CPI besides Food, Energy and Shelter--and rightly so as the average American consumes way more than these 3 on a yearly basis.
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Guess a prediction from Chicken Little Buchannan means there will be no recession. That Victory in Iraq really has his panties in a knot.
Pray for W and Our Freedom Fighters
Besides gas—which is about 5% of my budget (up around 20% from last year) and food which is around 8 % of my budget (up around 7%), nothing else is over 3%. When you take the decline in housing which is 40% of the inflation rate, it’s basically a wash there. TVs, Electronics & clothing have actually gotten cheaper this year. Anyone who actually believes that real inflation is at 20% is a out and out kook. If you drive an SUV getting 12 mpg and live 60-100 miles from work...sorry I don’t sympathize with you at all.
Actually the gov’t lobbed off .9% in 3rd qtr gdp..keep in mind that is a quarter not the annual rate.
I was actually trying to compare 1929 Germany to 2008 U.S.,
assuming the dollar keeps tanking and all the foreigners start dropping their dollars & US holdings.
I believe that would cause inflation, big-time.
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