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To: goldsheet who wrote (51268)	4/11/2000 7:51:00 PM
From: Mike M2	Respond to of 116836

Bob, from the Austrian economics perspective the major flaw with the monetarist explanation of the Great Depression is they simply ignore the role of inflationary credit created outside the banking system through the securities and money markets. Such credit does not create money so it is not captured by the monetary aggregates but it does increase money velocity. Nonetheless, credit inflation fueled financial speculation which would sow the seeds of its own destruction due to the unsustainable imbalances it created. In Benjamin Anderson's " Economics and the Public Welfare" he notes that while"... the New York federal Reserve Bank had raised its discount rate from five to six percent on aug. 9, 1929 it was symbolic as it represented a compromise. The other side, and the really important side, of this compromise was that the Federal Reserve buying rate for prime bankers' acceptances was reduced on the same day from 5 1/4% to 5 1/8 %. this pulled down the federal reserve rate to the level of the market and opened up the federal Reserve banks to acceptances at the pleasure of the market. Following this there was an increase in acceptances held by the federal Reserve banks from $72 million on july 31 to $ 275 million on sept. 30, which meant a relief to member bank reserves sufficient to ease the money market. the call loan rate dropped from 9.6 % on aug 10 to 6.2% on oct. 12 . stock exchange time loans eased from 8.88% on aug 10 to 7.75 % on aug 19. " p.215 mike