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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Elroy Jetson who wrote (59030)	4/21/2006 5:25:13 PM
From: shades	Read Replies (2) of 110194

bankdersysrisk.blogspot.com The first mistake is thinking that prices in the Depression declines to their pre-asset bubble levels. They did not. Not even close. The economy in the depression experienced a very slight deflation. The money supply only shrank from $68.25 billion to $64.72 billion for a decline of only $3.2 billion. The total money supply from the middle of 1929 at the height of the bubble started at $73.3 billion and only fell to $64.7 billion in 1932. This is a total compression of the money supply of only 11.6% or 3.3% per year. The inflation rate of the money supply was 7.7% per year during the boom in the 1920’s. Therefore we hardly deflated at all and prices never went down to their pre asset bubble prices. So why didn’t we get a higher rate of deflation due to all of these bankruptcies, debt forgiveness, and repudiation of debt, because we were still inflating the currency. The inflation was just not enough to counter the downward forces of oversupply, increased efficiency, and destruction of money, and pulling money out of the banking system. Thus landlords lost their residential buildings in tax sales. My grandpa lost his farm to fellow farmers - but they figured they could add the land and work it and make positive cash flow - why would a guy buy a rental house if he knew the taxes cost more than the rent and broke the last guy? See they went up on my taxes on a lot of property - then I went and talked to my friends over at the tax office and then my taxes went way down - but that lawyer whose wife was tax assessor for the county - his taxes even went lower than mine - HAHA!

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