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Politics : Idea Of The Day

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To: Crystal ball who wrote (28169)	8/25/1999 8:59:00 AM
From: MeDroogies	Read Replies (1) of 50167

No offense, I'm sure you're well read on the subject - but not a single economist today points to the stock crash as the cause of the Depression. In fact, several Depressions have occurred in US history WITHOUT being preceded by market crashes. Rather, the cause of the problem was one of oversupply of goods, and an unstable and untried Federal Reserve. In the face of rising prices (despite inventories that weren't moving), the Fed failed to raise interest rates. This became more apparently a problem on Main Street in the midsummer of '29, as prices began to plunge. In fact, you can generally say the Depression began in earnest in about August, as more of middle America lost their jobs and prices for goods began to slip. Wall Street's crash was really just the Fort Sumter of the Depression - the loudest bang and the one that resounds through time. But I don't think anyone believes that Sumter caused the Civil War....just as they don't think the Crash caused the Depression. Did it WORSEN the long term outlook? Absolutely. It took tons of money out of the pockets of those who powered the economy. This led to a shortage of working capital and a flight from markets. But it still wasn't the cause.

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