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To: pater tenebrarum who wrote (53630)	1/3/2001 6:49:55 PM
From: Oblomov	Read Replies (2) \| Respond to of 436258

Lastly, it is erroneous to regard falls in stock prices as causing recessions. The popular theory argues that a fall in stock prices lowers individuals’ wealth and this in turn weakens consumers' outlays. Consumers spending is 66 percent of GDP, so surely a fall in the stock market plunges the economy into a recession. But the prices of stocks mirror individuals’ assessments regarding the value of various companies. A loose monetary policy tends to make this assessment erroneous. I thought that one tenet of the Austrian theory of the Great Depression is that it was caused in part by the negative wealth effect of the '29-'31 crash...