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.
Care to make a wager on that? Even the site you list has alternate inflation at only 7.5%
the 1929 depression was world wide... I understand.
For years a liberal friend had been telling me that Buchanan was a hate-monger. I told her she was wrong. Now I see she was right.
All of these things are increasing at 10+%/year
If you want to buy gum and geritol and are on medicaid, everything is cool...
Keep the old folks happy, God knows they are the only people that actually vote. I know this is true, the RNC told me so. I am a good republican so I believe this./sarcasm
Let's hope that the Fed will not have to go to more permanent open market ops.
M3 isn’t the best judge of inflation. It’s but one measure.
thank you. your’re right. it was the Reichsmark.
i’ll shut up now.
the sky is falling........
the sky is falling........
the sky is falling........
the sky is falling........
the sky is falling........
She was right.
Yep. And they did that with toilet paper years ago as well. Double roll my butt. ;)
I’d say that Pat B. makes many interesting points, but he focuses almost exclusively on the negative and ignores the positive (just as the mainstream media does with regard to the war in Iraq). I’m no economist, but I’m reading Bob Brinker’s Marketimer, and he says the risk of either recession or inflation are both low. I’ll take his prognosis over Pat’s.
The Fed and socialist politicians have always been the problem.
Now let’s stop comparing eggs with computers.
Have a Happy Thanksgiving, Molly!
What vehicle could we use to invest in the European currency? How does Soros do it?
I don’t know how Soros does it and sure wish I knew. Soros is very good at it.
Why? Eggs aren’t necessary to sustain life (I rarely if ever eat them) and even if you eat 2 dozen eggs a week (which isn’t healthy)—even at the inflated price now is only $150 a year vs $80 before. $70 / 12 = around $6 extra per month. As a % of my budget, that’s like .1% if that. One food item is not a good example of inflation. Besides eggs were like $1.40 a dozen a few years ago before dropping to under a dollar a couple years ago.
The point is not that any of us can calculate an accurate CPI or inflation rate by going to the grocery store.
The point is, they're lying, all the time, and as more and more people cop on, and as trust ebbs away, a serious situation is being created.
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