Zeev, << In 1929, the floor dropped amongst other things because the Fed's (both
the bank and the spenders) continued with restrained fiscal policy during the first few
months.>>
This is not true. Both NY Fed and commercial banks made funds readily available prior to Oct 29, actually, starting Oct 23, 1929. It is well documented. The easy money policy was largely recinded by the end of Nov, when a relief rally was well underway. Call money rates were maintained at 5% throughout the crash. But people just did not borrow much. You can lead the horse to water, but you can't make him drink.
<<In 1929, the monetary autorities did not make any attempts to increase liquidity long before the damage on the paper assets market spread to all other assets categories and as a result precipitated contraction in demand.>>
I assume here you stared to talk about 1930 and later, to 1933. This is not true either. Discount rate was lowered in steps to 0.5%, but money supply contracted anyway. This was the reason FDR announced "bank holyday" (closed banks) and dropped the $ gold standard, odered surrender of gold by private owners shortly after his instalement as President. Not that it helped much.
If one is to learn from history, one has first to learn what was the history.
Joe |
