9-19-08 The day the Truth was spoken.

[EconProf]

The Great Depression was deeper and longer than it should have been for a variety of reasons, some already mentioned here. Trade dried up, thanks to our congress foolishly raising tariffs via the infamous Smoot-Hawley bill. The 1929 stock market crash was more symbol than cause of the economic contraction that followed it. A factor not yet mentioned is contraction of the money supply, stressed by no less a conservative than Milton Friedman. The Fed at that time did not know of its own power to stimulate the economy, and failed to use monetary policy properly. As a result, prices and wages fell precipitously; confidence was so low that even people and businesses with money hoarded what thay had and investment and consumer spending just dried up. This crowd psychology is what I worry about today, as people could panic and create runs on banks, food stores, etc. Bernanke is a student of the Great Depression, and seems determined to avoid “paralysis by analysis” by acting preemptively and forcefully.

[Occams Realtor]

EconProf,

I also worry about crowd psychology in the current economic situation. Although this same crowd psychology caused hoarding during the great depression, I see a new component that could speed the process significantly and that is information technology. There are many news sources where stocks can be seen decreasing precipitously, during which commentators or journalists reiterate just how precipitous a drop might be (internet, TV). I imagine during the 1930’s people got their information from newspapers, radio and word of mouth; a much slower process. I wonder if Bernanke is considering this accelerated transfer of information in the timeline for a modern day economic depression.

[Occams Realtor]

EconProf,

I also worry about crowd psychology in the current economic situation. Although this same crowd psychology caused hoarding during the great depression, I see a new component that could speed the process significantly and that is information technology. There are many news sources where stocks can be seen decreasing precipitously, during which commentators or journalists reiterate just how precipitous a drop might be (internet, TV). I imagine during the 1930’s people got their information from newspapers, radio and word of mouth; a much slower process. I wonder if Bernanke is considering this accelerated transfer of information in the timeline for a modern day economic depression.

[Occams Realtor]

EconProf,

I also worry about crowd psychology in the current economic situation. Although this same crowd psychology caused hoarding during the great depression, I see a new component that could speed the process significantly and that is information technology. There are many news sources where stocks can be seen decreasing precipitously, during which commentators or journalists reiterate just how precipitous a drop might be (internet, TV). I imagine during the 1930’s people got their information from newspapers, radio and word of mouth; a much slower process. I wonder if Bernanke is considering this accelerated transfer of information in the timeline for a modern day economic depression.

[Occams Realtor]

EconProf,

I also worry about crowd psychology in the current economic situation. Although this same crowd psychology caused hoarding during the great depression, I see a new component that could speed the process significantly and that is information technology. There are many news sources where stocks can be seen decreasing precipitously, during which commentators or journalists reiterate just how precipitous a drop might be (internet, TV). I imagine during the 1930’s people got their information from newspapers, radio and word of mouth; a much slower process. I wonder if Bernanke is considering this accelerated transfer of information in the timeline for a modern day economic depression.

[Occams Realtor]

EconProf,

I also worry about crowd psychology in the current economic situation. Although this same crowd psychology caused hoarding during the great depression, I see a new component that could speed the process significantly and that is information technology. There are many news sources where stocks can be seen decreasing precipitously, during which commentators or journalists reiterate just how precipitous a drop might be (internet, TV). I imagine during the 1930’s people got their information from newspapers, radio and word of mouth; a much slower process. I wonder if Bernanke is considering this accelerated transfer of information in the timeline for a modern day economic depression.

[EconProf]

Occams Realtor,

You have a point, and the speed of info transmission along with an alarmist media adds to the volatility.
The many bank panics of the nineteenth century often brought down perfectly good banks. They just did not have the liquidity on hand to meet the bank runs by a panic driven public inflamed by a rumor. The Fed was created in large part to temporarily lend to such a bank to squelch the panic.

[EconProf]

Occams Realtor,

You have a point, and the speed of info transmission along with an alarmist media adds to the volatility.
The many bank panics of the nineteenth century often brought down perfectly good banks. They just did not have the liquidity on hand to meet the bank runs by a panic driven public inflamed by a rumor. The Fed was created in large part to temporarily lend to such a bank to squelch the panic.

[EconProf]

Occams Realtor,

You have a point, and the speed of info transmission along with an alarmist media adds to the volatility.
The many bank panics of the nineteenth century often brought down perfectly good banks. They just did not have the liquidity on hand to meet the bank runs by a panic driven public inflamed by a rumor. The Fed was created in large part to temporarily lend to such a bank to squelch the panic.

[EconProf]

Occams Realtor,

You have a point, and the speed of info transmission along with an alarmist media adds to the volatility.
The many bank panics of the nineteenth century often brought down perfectly good banks. They just did not have the liquidity on hand to meet the bank runs by a panic driven public inflamed by a rumor. The Fed was created in large part to temporarily lend to such a bank to squelch the panic.

[EconProf]

Occams Realtor,

You have a point, and the speed of info transmission along with an alarmist media adds to the volatility.
The many bank panics of the nineteenth century often brought down perfectly good banks. They just did not have the liquidity on hand to meet the bank runs by a panic driven public inflamed by a rumor. The Fed was created in large part to temporarily lend to such a bank to squelch the panic.

[paramount]

This bailout reminds me of the Patriot Act “process” – ram it through quickly (without thorough review/debate) or else there will be dire consequences.

Seems like a very similiar strategy.

Scary…

[paramount]

This bailout reminds me of the Patriot Act “process” – ram it through quickly (without thorough review/debate) or else there will be dire consequences.

Seems like a very similiar strategy.

Scary…

[paramount]

This bailout reminds me of the Patriot Act “process” – ram it through quickly (without thorough review/debate) or else there will be dire consequences.

Seems like a very similiar strategy.

Scary…

[paramount]

This bailout reminds me of the Patriot Act “process” – ram it through quickly (without thorough review/debate) or else there will be dire consequences.

Seems like a very similiar strategy.

Scary…

[Author]

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