Hi Jon, I see a HUGE Difference. The FED cut the money supply by 1/3 from the end of 1929 going into the early 1930's. The Secretary of the Treasury and The FED officials felt that too much money / liquidity was the cause of the crash and lower the monetary base was necessary.
Milton Friedman and Anna Swartz's book on the Monetary History of the US from 1867-1960, placed blame squarely on the FED's policy of monetary reductions for both the Intensity and length of the Depresssion
Bernanke and other central bankers such as Timothy Geithner, have taken this to heart.
Bernanke is particularly interested in the economic and political causes of the Great Depression, on which he has written extensively.
Bernanke's own words on why the 2007 - 2009 experience will be the polar opposite:
On Milton Friedman's ninetieth birthday, November 8, 2002, he stated: "Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it., We're very sorry. But thanks to you, we won't do it again."[12][13][14]
en.wikipedia.org
that quote mid way through B B's profile on Wiki
We have seen Bloomberg today talk about the US system coming up with 7.75 Trillion dollars to alleviate this process.
I had the highest estimates on Wall Street A year ago in term of what Credit Default Swaps and other Credit asset write downs would come to. I stated long ago it would be a 10 Trillion dollar problem. And the British, The Swiss the ECB, The Chinese have already injected a couple of trillion dollars into this work out.
And The Central Bank Balance sheet can keep expanding much much beyond these levels, so long as we don't have a complete currency collapse. But that's why I'm starting to get bearish on the USDollar for the coming months.
Japan in the 1990's did not take the write downs, and cleanse the system.
As Pimco's co-head commented a couple months ago that, barring a full blown world wide economic collapse, the events that are occurring will be highly inflationary in the future... He said that 5.5 Trillion Dollars ago.
The official playbook, as writen up by Milton Friedman, Gov. Bernake, and other senior officials calls for a reflation out of this serious asset deflation. Reflation, should give way to inflation. A generalized inflation will take time. If the $USD had not rallied so massively since July, crude would not be this cheap. In terms of some hard assets, don't mistake a flight to liquidity and safety in the US Dollar to be a long term phenomenon.
Gold is @ $821... it was in the $925 to $935 range in Oct, and is up from $252.50 back in mid 1999.
At the end of the day all prices are determined by the value of the currency / currencies.... we have seen massive volatility this year.
In summation, The Head of the FED told the Monetarist, We will not let a deflationary depression happen again.
John |
