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To: Mike M2 who wrote (142)	3/31/2001 1:34:36 PM
From: Ilaine	Read Replies (2) \| Respond to of 443

I like Richebacher, but I am not impressed with his analysis. He's probably dumbing it down for the lowest common denominator of his audience, but it's not very helpful to use words like "reckless", "frenzy", "mania", "monstrous," etc. other than to scare people. He spouts the same line you read in the papers - the Great Crash in October and November 1929 destroyed $25 billion in assets. Yet, when you analyze that, it's simply not true. As we have discussed before, when you multiply the total market cap of a stock times the closing price of a stock, that doesn't tell you anything as to whether anyone made or lost money. If I buy 100 shares of XYZ for $10, go on an extended vacation to a secluded desert isle, and while I am gone the stock runs up to $100 and then plummets back to $10, I have not "lost" anything. At the end of 1929, shareholders were ahead of where they were at the beginning of 1929. In the meantime, every dollar that a stock sold for wound up in someone's pocket, and no one ever accounts for that, either. One of the curious things I am reading, I don't know if it's true, but I've read it several places, is that no one has yet done a really good analysis of the events of 1929. Everyone starts after the crash. The paragraph Richebacher lifted from the League of Nations report: >>To cite from a contemporary report by the League of Nations about this development: "The credit expansion after 1927 in the United States went largely to the financing of speculation. According to available statistics, no less than 86% of the total increase in bank credit was used for that purpose. Thus was laid the foundation for the stock-exchange boom which followed."<< This statement, believe it or not, is simply hearsay. No one actually sat down and analyzed the data. And they don't tell you how they define "speculation." You may think you know something after you read this paragraph but you don't. The dirty secret of scholarship in the social sciences is that, like all scholars, they must publish or perish, but no one ever goes back and checks their facts. So if you cite something that looks authoritative, it passes muster. Quite unlike hard science, where your studies must be able to be replicated by other scientists, and you must show the work you did. It's shoddy, and irresponsible. Pure sensationalism. He gets an "F" for scholarship.

To: Mike M2 who wrote (142)	3/31/2001 3:32:47 PM
From: Thomas M.	Read Replies (1) \| Respond to of 443

That's a brilliant analysis of the Great Depression. The damage that Friedman's analysis has done is enormous. Benjamin Anderson is rolling over in his grave right now. It was clear to any sane observer that the Fed was pumping, and the money was going directly into speculation. And, it wasn't just in the 1927 pump, it was before that too. Commercial loans began declining in 1924. The credit expansion after 1927 in the United States went largely to the financing of speculation. According to available statistics, no less than 86% of the total increase in bank credit was used for that purpose. HO HO HO! Tom

To: Mike M2 who wrote (142)	4/1/2001 7:41:08 PM
From: JF Quinnelly	Read Replies (1) \| Respond to of 443

Thanks, Richebacher is always interesting. I don't see the big conflict between the Austrians and the monetarists that he does. I think there's truth in both schools. IMO you can divide the Depression into two events. The first, the market collapse, I see as being predicted in Austrian theory by the prolonged credit expansion of the 20s. The second, which mutated a bad market crash into the Depression, was the ensuing collapse of banks. I don't think the collapse of the banks was a necessary result of the market crash. I think the Fed could have acted to protect the banking system, by suspending convertability, purchasing the assets of problem banks, and a few other tools to provide liquidity at the start of the crisis. One problem was that much of the banking crisis occurred during the interregnum between Hoover's loss and FDR taking office. Hoover didn't think he could take the drastic action he felt was necessary to prop up the banks. He sent urged FDR to make a public statement to calm down the bank runs, but FDR chose to wait until he took office.