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To: Wyätt Gwyön who wrote (49020)	2/17/2001 9:16:58 AM
From: Zoltan!	Read Replies (1) \| Respond to of 77400

You are absolutely wrong. With declining prices, real interest rates were rising, not falling. The Fed did cause the Depression by destroying money in its efforts to remain on the gold standard.

To: Wyätt Gwyön who wrote (49020)	2/17/2001 12:30:29 PM
From: Steve	Read Replies (4) \| Respond to of 77400

The Fed kept raising rates into Feb of 1930 to 5% and only barely lowered them through 1934 to 3.5% from 5%. By keeping interest rates high the Fed choked off a potential recovery that could have been well on its way by mid to late 1930. It is a myth that the Fed and the Federal Reserve banks did not raise rates exactly in this period. The New York Fed aggressively raised rates from 1931 to 1932. This likely triggered the fall in the DOW to the 50s from nearly 200. Please elucidate the similarities and differences between Japan in the late 1980s and early 1990s and the US in the 1990s and today. If you do that I think you will find that the Japanese financial system is inflexible and incapable of change and still has not dealt with worthless assets on the books of the banks. In the US such assets must be written down and the loss taken and if insolvency looms the bank will be liquidated or merged into a solvent bank.

To: Wyätt Gwyön who wrote (49020)	2/17/2001 6:25:31 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 77400

Actually, the Fed raised interest rates in the late 1920s, right before the Crash. Then, they waited a couple of years into the Depression before lowering rates. Yes, eventually they lowered rates, but way too late. However, you are right, the interest rates were not the main cause. Interest rate mismanagement, and allowing a massive credit bubble, was the initial cause of the Crash. But it would have all been over by 1932, if not for a further, bigger mistake. In the early 1930s, the government tried to protect U.S. industries by raising tariffs. Other countries retaliated in kind, world trade collapsed, and didn't recover until after the war. Protectionism, not interest rates, was why the Depression lasted so long. Today we have low interest rates, and a strong commitment to free trade among both political parties. In addition, we do not have the structural problems Japan has, where "saving face" means that strong companies and banks are obligated to support the weak, so bad debts never get cleared out of the system. What we did with our S&L mess, the Japanese have avoided doing for a decade for their massive bank and corporate bad debt. So, the underlying conditions of a decade-long economic slump are not present, and there is zero possibility of another Great Depression. Worst-case, we get a 6-18 month recession, over by late next year. Best-case, we get a couple of quarters of near-zero growth this year, over by 4Q2001. That's the range of possible futures.