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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Elroy Jetson who wrote (25723)3/19/2005 1:45:50 AM
From: shades  Read Replies (2) of 116555
 
Elroy during the crash in 1890 california - assuming the banks kept increasing credit, reducing interest rates and most investors instead of dumping decided instead to hold thier property no matter what - how could this crash have turned out differently - could they have had instead a slow decline back to long term price levels? Could the price run up have been more effectively managed with easy money and credit policies to smooth out the boom/bust? I read in 1929 and the few years after that the tightening of credit and money too quickly is what caused a real sharp pain - you don't want to take the crack head off the drugs cold turkey or the smoker off the cigs or the eater off the twinkies - you want to slowly push them over to a new habit to ease the pain.

So taking the punch bowl away from the party might piss everyone off and cause problems - but if you let them drink to thier content until they start seeing on thier own the punch is getting smaller and smaller - won't things be more mananged and smoother? No sharp adjustments up or down?

I think the problem is along with not tightening credit and money TOO FAST, you can't loosen it too fast either - is this what happened in california 1890 - had interest rates taken a SHARP decline in just the prevailing few years?
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