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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: JBonline who wrote (3645)7/29/2002 1:55:10 AM
From: Elroy JetsonRead Replies (1) of 306849
 
Due to farm price-supports, a legacy of the 1930s, the deflation in agricultural prices has not caused the same financial destruction as it did from 1924 forward. But you are correct that as happened 75 years ago deflation first hits raw material prices (wheat, oil, etc). This raises profit margins for businesses and increases the standard of living for workers in other industries.

Deflation later spreads to the rest of the economy and wages. It's interesting to note that during the Great Depression real estate rents fell 36% while real estate prices fell 69%. I learned many stories from my Grandparents about Los Angeles during those years. They purchased a home (which had sold a couple of years before for $6,500) for $500. It will be interesting to see if the Fed following Keynsian solutions can minimize this sort of outcome this time around.

Another interesting problem was the large number of people who killed themselves in order for their families to receive their Life Insurance proceeds. A significant number of Life companies failed due to the accelerated payment of benefits - coupled with investment losses.

As for the dubious great productivity gains of the 1990s - I agree with you that I find it hard to believe that anyone takes this seriously. Even in the minutes from private meetings, Greenspan seemed to truly believe these figures. But of course the most recent minutes are from meetings five years ago. I would have to assume his level of skepticism is significantly greater today. I would hate to think the Chairman of the Fed is as idiotic as a Larry Kudlow - a man who in a previous life must have set economic policy for the Weimar Republic. I can't believe that babbling imbecile is taken seriously by anyone.
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