That's quite a "nutshell." -g- I think I counted six different reasons, all happening at the same time, more or less, and sort of going off in different directions. Please forgive me if I say that your explanation doesn't really make it any easier to understand. If the different reasons are related, it needs to be shown how they are related.
>>the Fed had of course no chance to avert the winter season of the K-wave, but it would not have turned into as bad a depression had it not financed the extreme speculative boom during the disinflationary autumn season<<
How exactly did they do that?
I just read in Richebacher that "the money supply grew only modestly. Between 1925-1929, broad money grew by no more than 10%, from $50 billion to $55.5 billion. Demand deposits at banks in late 1929, at $22 billion were no higher than in late 1925."
gold-eagle.com
I'm looking at a chart for the New York Fed discount rate, and I see it was raised three times in 1928, starting at 4% and ending at 5%, and then was raised again in 1929 to 6%. For most of '26 and most of '27 it was at 4%. And, as you say, commodities started to deflate first, in 1926, so the real interest rate was even higher.
Some say that the US stock market boom began in June-September, 1927, when the Fed cut the discount rate from 4% to 3 1/2% for a few months, in order to assist the Bank of England in maintaining the pound at pre-WWI parity, but the Fed raised the rate back to 4% in early 1928. But in fact, the US stock market index rose 50% between April, 1925, when Britain returned to the gold standard, and August, 1927, when the NY Fed cut the rate to 3 1/2%.
There was, indeed, an increase in credit. Richebacher says that "no statistics are available."
I have no idea what an "autumn season" means in this context. |
