To: BGR who wrote (71612 ) 12/9/1999 3:22:00 PM From: Mike M2 Read Replies (1) | Respond to
BGR, Paul Warburg - partner at Kuhn Loeb lobbied heavily for the creation of the Federal Reserve in the US - some consider him to be the most influencial force behind the creation of the Fed -( against the wishes of our founding fathers) I believe he was our first Fed Chairman. In march, 1929 Warburg said: " History, which has a painful way of repeating itself, has taught mankind that speculative over-expansion invariably ends in over-contraction and distress. If a stock exchange debauch is quickly arrested by prompt and determined action, it is not too much to hope that a shrinkage of inflated stock prices may be brought about without seriously affecting the wider circle of general business. if orgies of unrestrained speculation are permitted to spread too far, however, the ultimate collapse is certain not only to affect the speculators themselves, but also to bring about a general depression involving the entire country. ... When the savings of the masses are deposited as margins for Stock exchange speculations, and when the extravagant use of funds for speculative purposes absorbs so much of the nation's credit supply that it threatens to cripple the countrry's regular business, then there does not seem to be any doubt as to the direction in which the Federal Reserve System ought to exercise its influence quickly and forcefully. People who express the fear that increase in the Federal reserve's rediscount rate might overlook the far greater hurt the country will have to suffer if their advice to permit the situation " to work itself out' were followed. " The commercial and Financial Chronicle" March 9,1929 p. 1444. So tell me BGR was Warburg prophetic statement just a lucky guess or is it possible that there is more than one outlet for inflation- expansion of money and credit beyond the supply of available savings and needs of economic activity. What issues do you have with Warburg's remarks? Mike
