U.S. TO DEFAULT ON ITS DEBT – SUMMER 2009

[Carl Veritas]

Arraya—

Which part of “A History Of Money and Banking” did you not understand?

Here is an article by JD Seagraves regarding Bretton Wooods 2 that I think other readers will also find revealing. If some of the historical facts mentioned are incorrect, let’s hear the correct ones—with sources please. You do form an opinion based on facts?

http://www.citizeneconomists.com/view_articles_detail.php?aid=129

[Carl Veritas]

Arraya, I did find a little something
http://mises.org/rothbard/agd/chapter4.asp#inflation
to tie the 1929 banking panic with the expansion of bank credit. It’s from an old book, which should be no surprise, since it did happen in the 1920s. It is the myths
surrounding the event that survives to this day that is surprising. Again, any incorrect figures from the book should be pointed out and the correct ones shown. With sources please.

[Carl Veritas]

Arraya, I did find a little something
http://mises.org/rothbard/agd/chapter4.asp#inflation
to tie the 1929 banking panic with the expansion of bank credit. It’s from an old book, which should be no surprise, since it did happen in the 1920s. It is the myths
surrounding the event that survives to this day that is surprising. Again, any incorrect figures from the book should be pointed out and the correct ones shown. With sources please.

[Carl Veritas]

Arraya, I did find a little something
http://mises.org/rothbard/agd/chapter4.asp#inflation
to tie the 1929 banking panic with the expansion of bank credit. It’s from an old book, which should be no surprise, since it did happen in the 1920s. It is the myths
surrounding the event that survives to this day that is surprising. Again, any incorrect figures from the book should be pointed out and the correct ones shown. With sources please.

[Carl Veritas]

Arraya, I did find a little something
http://mises.org/rothbard/agd/chapter4.asp#inflation
to tie the 1929 banking panic with the expansion of bank credit. It’s from an old book, which should be no surprise, since it did happen in the 1920s. It is the myths
surrounding the event that survives to this day that is surprising. Again, any incorrect figures from the book should be pointed out and the correct ones shown. With sources please.

[Carl Veritas]

Arraya, I did find a little something
http://mises.org/rothbard/agd/chapter4.asp#inflation
to tie the 1929 banking panic with the expansion of bank credit. It’s from an old book, which should be no surprise, since it did happen in the 1920s. It is the myths
surrounding the event that survives to this day that is surprising. Again, any incorrect figures from the book should be pointed out and the correct ones shown. With sources please.

[urbanrealtor]

Bryan:
Well clearly we are reading different sources.
The stuff I have seen points to 3-4 primary points of causality of the great depression (assuming we are not focusing on Marxist thought or the fringes of Keynesian thought). Those are:

-hyper leveraging at the consumer and firm level
Eg: too many loans used to bet on margin.

-broad return to precious metal standards
Eg: the run on British Sterling’s gold in ’31 (and implied near run on US dollar’s gold in ’32)

-deflationary debt counter-incentives
Eg: you can’t borrow if the value of the money is going up dramatically each day.

-increase in interest rates (sometimes framed in terms of contracting monetary policy)
Eg: How do you borrow when interest rates are too high?

-institutional market-accelerators (not a primary cause but companies failing tend to create a longevity of despair)
Eg: Failing banks leave lots of people without confidence in financial markets.

Experts: Peter Temin, Irving Fisher, Ben Bernanke, Barry Eichengreen, Paul Krugman, Milton Friedman, Anna Schwartzman

Sources: Just google them. They all have like a hundred articles and books in print.

Here is a readable and easy one:
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

You could make the argument that the leveraging is an example of dumb credit expansion on the part of banks (I am assuming that is what you mean by expansion of bank credit as opposed to say borrowing from the fed).

You could also make the argument that the increase in rates (ironically to counteract a perceived speculative bubble) was instrumental in the 1929 crash. That is what Bernanke argues (though, in the wake of 2 organic speculative bubble bursts, he may back off of those assertions).

However, you could not make the argument convincingly that increasing money supplies in a deflationary cycle is bad. Deflation is usually prohibitive to lending and therefore creates a positive feedback loop. There is less money to go around and so prices deflate further.

That is where the whole love affair with the precious metal standard breaks down.

Can you explain to me why I am wrong-headed in this?

Incidentally, the central bank was not dropped on the country like a cargo container. It was requested by the ad hoc coalition of banks (headed by JP Morgan) following the 1907 problems.

[urbanrealtor]

Bryan:
Well clearly we are reading different sources.
The stuff I have seen points to 3-4 primary points of causality of the great depression (assuming we are not focusing on Marxist thought or the fringes of Keynesian thought). Those are:

-hyper leveraging at the consumer and firm level
Eg: too many loans used to bet on margin.

-broad return to precious metal standards
Eg: the run on British Sterling’s gold in ’31 (and implied near run on US dollar’s gold in ’32)

-deflationary debt counter-incentives
Eg: you can’t borrow if the value of the money is going up dramatically each day.

-increase in interest rates (sometimes framed in terms of contracting monetary policy)
Eg: How do you borrow when interest rates are too high?

-institutional market-accelerators (not a primary cause but companies failing tend to create a longevity of despair)
Eg: Failing banks leave lots of people without confidence in financial markets.

Experts: Peter Temin, Irving Fisher, Ben Bernanke, Barry Eichengreen, Paul Krugman, Milton Friedman, Anna Schwartzman

Sources: Just google them. They all have like a hundred articles and books in print.

Here is a readable and easy one:
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

You could make the argument that the leveraging is an example of dumb credit expansion on the part of banks (I am assuming that is what you mean by expansion of bank credit as opposed to say borrowing from the fed).

You could also make the argument that the increase in rates (ironically to counteract a perceived speculative bubble) was instrumental in the 1929 crash. That is what Bernanke argues (though, in the wake of 2 organic speculative bubble bursts, he may back off of those assertions).

However, you could not make the argument convincingly that increasing money supplies in a deflationary cycle is bad. Deflation is usually prohibitive to lending and therefore creates a positive feedback loop. There is less money to go around and so prices deflate further.

That is where the whole love affair with the precious metal standard breaks down.

Can you explain to me why I am wrong-headed in this?

Incidentally, the central bank was not dropped on the country like a cargo container. It was requested by the ad hoc coalition of banks (headed by JP Morgan) following the 1907 problems.

[urbanrealtor]

Bryan:
Well clearly we are reading different sources.
The stuff I have seen points to 3-4 primary points of causality of the great depression (assuming we are not focusing on Marxist thought or the fringes of Keynesian thought). Those are:

-hyper leveraging at the consumer and firm level
Eg: too many loans used to bet on margin.

-broad return to precious metal standards
Eg: the run on British Sterling’s gold in ’31 (and implied near run on US dollar’s gold in ’32)

-deflationary debt counter-incentives
Eg: you can’t borrow if the value of the money is going up dramatically each day.

-increase in interest rates (sometimes framed in terms of contracting monetary policy)
Eg: How do you borrow when interest rates are too high?

-institutional market-accelerators (not a primary cause but companies failing tend to create a longevity of despair)
Eg: Failing banks leave lots of people without confidence in financial markets.

Experts: Peter Temin, Irving Fisher, Ben Bernanke, Barry Eichengreen, Paul Krugman, Milton Friedman, Anna Schwartzman

Sources: Just google them. They all have like a hundred articles and books in print.

Here is a readable and easy one:
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

You could make the argument that the leveraging is an example of dumb credit expansion on the part of banks (I am assuming that is what you mean by expansion of bank credit as opposed to say borrowing from the fed).

You could also make the argument that the increase in rates (ironically to counteract a perceived speculative bubble) was instrumental in the 1929 crash. That is what Bernanke argues (though, in the wake of 2 organic speculative bubble bursts, he may back off of those assertions).

However, you could not make the argument convincingly that increasing money supplies in a deflationary cycle is bad. Deflation is usually prohibitive to lending and therefore creates a positive feedback loop. There is less money to go around and so prices deflate further.

That is where the whole love affair with the precious metal standard breaks down.

Can you explain to me why I am wrong-headed in this?

Incidentally, the central bank was not dropped on the country like a cargo container. It was requested by the ad hoc coalition of banks (headed by JP Morgan) following the 1907 problems.

[urbanrealtor]

Bryan:
Well clearly we are reading different sources.
The stuff I have seen points to 3-4 primary points of causality of the great depression (assuming we are not focusing on Marxist thought or the fringes of Keynesian thought). Those are:

-hyper leveraging at the consumer and firm level
Eg: too many loans used to bet on margin.

-broad return to precious metal standards
Eg: the run on British Sterling’s gold in ’31 (and implied near run on US dollar’s gold in ’32)

-deflationary debt counter-incentives
Eg: you can’t borrow if the value of the money is going up dramatically each day.

-increase in interest rates (sometimes framed in terms of contracting monetary policy)
Eg: How do you borrow when interest rates are too high?

-institutional market-accelerators (not a primary cause but companies failing tend to create a longevity of despair)
Eg: Failing banks leave lots of people without confidence in financial markets.

Experts: Peter Temin, Irving Fisher, Ben Bernanke, Barry Eichengreen, Paul Krugman, Milton Friedman, Anna Schwartzman

Sources: Just google them. They all have like a hundred articles and books in print.

Here is a readable and easy one:
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

You could make the argument that the leveraging is an example of dumb credit expansion on the part of banks (I am assuming that is what you mean by expansion of bank credit as opposed to say borrowing from the fed).

You could also make the argument that the increase in rates (ironically to counteract a perceived speculative bubble) was instrumental in the 1929 crash. That is what Bernanke argues (though, in the wake of 2 organic speculative bubble bursts, he may back off of those assertions).

However, you could not make the argument convincingly that increasing money supplies in a deflationary cycle is bad. Deflation is usually prohibitive to lending and therefore creates a positive feedback loop. There is less money to go around and so prices deflate further.

That is where the whole love affair with the precious metal standard breaks down.

Can you explain to me why I am wrong-headed in this?

Incidentally, the central bank was not dropped on the country like a cargo container. It was requested by the ad hoc coalition of banks (headed by JP Morgan) following the 1907 problems.

[urbanrealtor]

Bryan:
Well clearly we are reading different sources.
The stuff I have seen points to 3-4 primary points of causality of the great depression (assuming we are not focusing on Marxist thought or the fringes of Keynesian thought). Those are:

-hyper leveraging at the consumer and firm level
Eg: too many loans used to bet on margin.

-broad return to precious metal standards
Eg: the run on British Sterling’s gold in ’31 (and implied near run on US dollar’s gold in ’32)

-deflationary debt counter-incentives
Eg: you can’t borrow if the value of the money is going up dramatically each day.

-increase in interest rates (sometimes framed in terms of contracting monetary policy)
Eg: How do you borrow when interest rates are too high?

-institutional market-accelerators (not a primary cause but companies failing tend to create a longevity of despair)
Eg: Failing banks leave lots of people without confidence in financial markets.

Experts: Peter Temin, Irving Fisher, Ben Bernanke, Barry Eichengreen, Paul Krugman, Milton Friedman, Anna Schwartzman

Sources: Just google them. They all have like a hundred articles and books in print.

Here is a readable and easy one:
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm

You could make the argument that the leveraging is an example of dumb credit expansion on the part of banks (I am assuming that is what you mean by expansion of bank credit as opposed to say borrowing from the fed).

You could also make the argument that the increase in rates (ironically to counteract a perceived speculative bubble) was instrumental in the 1929 crash. That is what Bernanke argues (though, in the wake of 2 organic speculative bubble bursts, he may back off of those assertions).

However, you could not make the argument convincingly that increasing money supplies in a deflationary cycle is bad. Deflation is usually prohibitive to lending and therefore creates a positive feedback loop. There is less money to go around and so prices deflate further.

That is where the whole love affair with the precious metal standard breaks down.

Can you explain to me why I am wrong-headed in this?

Incidentally, the central bank was not dropped on the country like a cargo container. It was requested by the ad hoc coalition of banks (headed by JP Morgan) following the 1907 problems.

[Carl Veritas]

Hoover is wrongheaded.
The Fed pumped money into the banking system in the 20s. The newly created money made its way to stock speculators and I think land speculators in Florida also.
The device is of course the level of interest rates.

In 1929 just as in the dot-com bubble and todays housing bust, The Feds increasing of commercial bank reserves went to the loan market allowing for the boom, and the bust arrives when the Fed reverses its monetary policy and starts raising rates.
The reasons the Fed raised rates differred but the result was the same.
Jobs and businesses that sprouted on the back of the boom are liquidated by the market.
Politicians start calling for the Fed to again prime the loan market and bring on prosperity. Deja vu.
So the boom originates in the business loan market.

The 1929 stock market crash scared depositors and began pulling their money out from banks en masse.
This forced banks to call in loans early causing widespread business failures, and of course job losses.
This is a period where people distrusted whats left of the decimated banking industry. The idea that if only the Fed just pumped enough bank reserves, somehow banks will lend and customers will borrow.
Just read todays headlines to see if that assertion holds water. Is Bernanke and Friedman in this camp?

Falling demand for goods are a natural result of widespread unemployment. Falling demand puts downward pressure on prices. Really?

This is the feared deflation that has been repeated time and again. Now, if people are unemployed what is needed is more production, not less. Hoover in fact believed that low prices is what is causing the depression and not the other way around. He subsidized industries to reduce their production
in an attempt to artificially lift prices. This was one of many wrongheaded polices he instituted that turned a banking panic to a calamity. Had he left things alone, the market would have liquidated unsound investments and the economy would have regained its footing a lot faster—just as it has in previous panics.

Roosevelt only continued Hoovers efforts to increase the size of the government(New Deal 2). He poured billions into make work projects and by the time he left office,
the unemployment figures remained about the same.
The nature of employment simply changed from private to government. Music to socialists ears.

Paul Krugman received the Nobel Prize in economics.
(The prize is awarded by the Swedish Central Bank).
Is this the person?

Quantity Of Money—
In a productive economy where money supply remained relatively constant, the market will adjust the purchasing power of the currency. In other words, money will simply buy more goods.

The opposite–increasing the money supply– produces
rising prices, in other words, money loses it’s purchasing power.

$1.00 in 1913 is the equivalent of $22.10 in 2008 is an example.

[Carl Veritas]

Hoover is wrongheaded.
The Fed pumped money into the banking system in the 20s. The newly created money made its way to stock speculators and I think land speculators in Florida also.
The device is of course the level of interest rates.

In 1929 just as in the dot-com bubble and todays housing bust, The Feds increasing of commercial bank reserves went to the loan market allowing for the boom, and the bust arrives when the Fed reverses its monetary policy and starts raising rates.
The reasons the Fed raised rates differred but the result was the same.
Jobs and businesses that sprouted on the back of the boom are liquidated by the market.
Politicians start calling for the Fed to again prime the loan market and bring on prosperity. Deja vu.
So the boom originates in the business loan market.

The 1929 stock market crash scared depositors and began pulling their money out from banks en masse.
This forced banks to call in loans early causing widespread business failures, and of course job losses.
This is a period where people distrusted whats left of the decimated banking industry. The idea that if only the Fed just pumped enough bank reserves, somehow banks will lend and customers will borrow.
Just read todays headlines to see if that assertion holds water. Is Bernanke and Friedman in this camp?

Falling demand for goods are a natural result of widespread unemployment. Falling demand puts downward pressure on prices. Really?

This is the feared deflation that has been repeated time and again. Now, if people are unemployed what is needed is more production, not less. Hoover in fact believed that low prices is what is causing the depression and not the other way around. He subsidized industries to reduce their production
in an attempt to artificially lift prices. This was one of many wrongheaded polices he instituted that turned a banking panic to a calamity. Had he left things alone, the market would have liquidated unsound investments and the economy would have regained its footing a lot faster—just as it has in previous panics.

Roosevelt only continued Hoovers efforts to increase the size of the government(New Deal 2). He poured billions into make work projects and by the time he left office,
the unemployment figures remained about the same.
The nature of employment simply changed from private to government. Music to socialists ears.

Paul Krugman received the Nobel Prize in economics.
(The prize is awarded by the Swedish Central Bank).
Is this the person?

Quantity Of Money—
In a productive economy where money supply remained relatively constant, the market will adjust the purchasing power of the currency. In other words, money will simply buy more goods.

The opposite–increasing the money supply– produces
rising prices, in other words, money loses it’s purchasing power.

$1.00 in 1913 is the equivalent of $22.10 in 2008 is an example.

[Carl Veritas]

Hoover is wrongheaded.
The Fed pumped money into the banking system in the 20s. The newly created money made its way to stock speculators and I think land speculators in Florida also.
The device is of course the level of interest rates.

In 1929 just as in the dot-com bubble and todays housing bust, The Feds increasing of commercial bank reserves went to the loan market allowing for the boom, and the bust arrives when the Fed reverses its monetary policy and starts raising rates.
The reasons the Fed raised rates differred but the result was the same.
Jobs and businesses that sprouted on the back of the boom are liquidated by the market.
Politicians start calling for the Fed to again prime the loan market and bring on prosperity. Deja vu.
So the boom originates in the business loan market.

The 1929 stock market crash scared depositors and began pulling their money out from banks en masse.
This forced banks to call in loans early causing widespread business failures, and of course job losses.
This is a period where people distrusted whats left of the decimated banking industry. The idea that if only the Fed just pumped enough bank reserves, somehow banks will lend and customers will borrow.
Just read todays headlines to see if that assertion holds water. Is Bernanke and Friedman in this camp?

Falling demand for goods are a natural result of widespread unemployment. Falling demand puts downward pressure on prices. Really?

This is the feared deflation that has been repeated time and again. Now, if people are unemployed what is needed is more production, not less. Hoover in fact believed that low prices is what is causing the depression and not the other way around. He subsidized industries to reduce their production
in an attempt to artificially lift prices. This was one of many wrongheaded polices he instituted that turned a banking panic to a calamity. Had he left things alone, the market would have liquidated unsound investments and the economy would have regained its footing a lot faster—just as it has in previous panics.

Roosevelt only continued Hoovers efforts to increase the size of the government(New Deal 2). He poured billions into make work projects and by the time he left office,
the unemployment figures remained about the same.
The nature of employment simply changed from private to government. Music to socialists ears.

Paul Krugman received the Nobel Prize in economics.
(The prize is awarded by the Swedish Central Bank).
Is this the person?

Quantity Of Money—
In a productive economy where money supply remained relatively constant, the market will adjust the purchasing power of the currency. In other words, money will simply buy more goods.

The opposite–increasing the money supply– produces
rising prices, in other words, money loses it’s purchasing power.

$1.00 in 1913 is the equivalent of $22.10 in 2008 is an example.

[Carl Veritas]

Hoover is wrongheaded.
The Fed pumped money into the banking system in the 20s. The newly created money made its way to stock speculators and I think land speculators in Florida also.
The device is of course the level of interest rates.

In 1929 just as in the dot-com bubble and todays housing bust, The Feds increasing of commercial bank reserves went to the loan market allowing for the boom, and the bust arrives when the Fed reverses its monetary policy and starts raising rates.
The reasons the Fed raised rates differred but the result was the same.
Jobs and businesses that sprouted on the back of the boom are liquidated by the market.
Politicians start calling for the Fed to again prime the loan market and bring on prosperity. Deja vu.
So the boom originates in the business loan market.

The 1929 stock market crash scared depositors and began pulling their money out from banks en masse.
This forced banks to call in loans early causing widespread business failures, and of course job losses.
This is a period where people distrusted whats left of the decimated banking industry. The idea that if only the Fed just pumped enough bank reserves, somehow banks will lend and customers will borrow.
Just read todays headlines to see if that assertion holds water. Is Bernanke and Friedman in this camp?

Falling demand for goods are a natural result of widespread unemployment. Falling demand puts downward pressure on prices. Really?

This is the feared deflation that has been repeated time and again. Now, if people are unemployed what is needed is more production, not less. Hoover in fact believed that low prices is what is causing the depression and not the other way around. He subsidized industries to reduce their production
in an attempt to artificially lift prices. This was one of many wrongheaded polices he instituted that turned a banking panic to a calamity. Had he left things alone, the market would have liquidated unsound investments and the economy would have regained its footing a lot faster—just as it has in previous panics.

Roosevelt only continued Hoovers efforts to increase the size of the government(New Deal 2). He poured billions into make work projects and by the time he left office,
the unemployment figures remained about the same.
The nature of employment simply changed from private to government. Music to socialists ears.

Paul Krugman received the Nobel Prize in economics.
(The prize is awarded by the Swedish Central Bank).
Is this the person?

Quantity Of Money—
In a productive economy where money supply remained relatively constant, the market will adjust the purchasing power of the currency. In other words, money will simply buy more goods.

The opposite–increasing the money supply– produces
rising prices, in other words, money loses it’s purchasing power.

$1.00 in 1913 is the equivalent of $22.10 in 2008 is an example.

[Author]

Posts