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Politics : Ask Michael Burke
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To: BGR who wrote (48407)2/23/1999 12:25:00 PM
From: Mike M2  Read Replies (1) of 132070
 
BGR, you refer to the Monetarist explanation of the Great Depression while it is very popular I disagree with them. I am a fan of the Austrian school of economics which believes central bank manipulation of interest rates creates the boom /bust cycle and the bust is the result of the excesses engendered during the boom. For a detailed explanation of the austrian perspective see Murray Rothbard's " America's Great Depression" . One fatal flaw to the monetarist explanation is their focus on the money supply which ignores non bank financing. consider that nonbank financing -the securities markets and call money markets was almost four times the volume of bank financing bank lending went into the securities markets and it was the collapse in market values of lower grades bonds which the banks held which hurt the banking system. in spite of attempts to reflate by the middle of 1932 the spread between interest rates on Baa bonds and treasuies had surged to 7.5 % more than 3 times their level prior to Oct. 1930 ( The Richebacher Letter). The current situation is alarming due to the unprecedented credit growth via the securities markets and non bank financial intermediaries. I will post some links for austrian related readings The Richebacher Letter 1217 St Paul St. Baltimore , MD 21202 Mike
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