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To: Ilaine who wrote (121)	3/30/2001 12:27:46 AM
From: JF Quinnelly	Read Replies (1) \| Respond to of 443

The money that vanished in the Depression was credit money. The big part of the pyramid in a fractional reserve system. It's why Austrian School economists get worried about monetary expansion- the expansion is credit, and it has the ability to quickly disappear down the black hole of missing money. Especially in an era before banks were "rescued" by the Fed. This worry has been lessened by the use of deposit insurance (but not for bank stock holders), but the ability of credit-created money to vanish is a problem inherent in fractional reserve banking.

To: Ilaine who wrote (121)	3/30/2001 12:48:41 AM
From: JF Quinnelly	Read Replies (1) \| Respond to of 443

You sound more like you're writing a sequel to Gravity's Rainbow rather than studying banking in the Great Depression. What occurred was a Perfect Storm of economic events. You had Reparations, which were logically impossible for the Germans to adhere to- Keynes warned about this as early as 1920 in his book The Economic Consequences of the Peace. You had the British trying to reestablish the pre-War value of the pound, which resulted in a prolonged British deflation. You had the Fed and Bank of England coordinating in a decade of American monetary inflation whose effect was masked by deflationary forces- new technology, inventions, a move from farming to manufacturing. You had a prolonged stock market boom in response to the monetary expansion. You had banks that were allowed to invest funds in stocks. You had banks collapse without the Fed attempting to keep the depositors whole. Once the vicious spiral got underway 30% of the American money supply, people's savings, simply went to Money Heaven as banks collapsed. And this doesn't even include the wealth lost by the collapse of stock prices. Throw in tariff wars and a tangle of new government bureaus and regulations and you get the Great Depression.