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To: Don Lloyd who wrote (323)	6/9/2001 5:14:19 PM
From: Ilaine	Read Replies (1) \| Respond to of 443

Those are very good questions, Don, and I intend to answer them, but can't answer them at the moment. I believe all the things you mention were factors, and more. You mention 1. Expansion of credit - by which I assume you are using shorthand to refer to misallocation of resources into production? I find this argument conceptually difficult to reconcile with Schumpeter's concept of creative destruction - you yourself argued recently that even when resources are not misallocated, they can still be rendered obsolete by new technology, if I understood you correctly. So it's sort of post hoc ergo propter hoc to blame misallocation on cheap credit, I think. Misallocation happens all the time due to creative destruction. 2. Collapse in demand due to economic depression - I am talking about pre-depression decline in prices, but certainly prices continued to decline throughout the depression. 3. Political constraints on international trade - I think you mean tariffs, maybe quotas? 4. Unemployment - I think that's a subcategory of #2. Some of the probable factors you didn't mention - 5. Industrialization speeded up the means of production. 6. Imperfect flow of information, not acting as a fast enough feedback loop so that producers would throttle back. 7. Dumping - the stuff was already produced, and it had to be gotten rid of somehow. The Soviets dumped a lot of wheat. 8. Global deflation was a natural reaction to the global inflation during and immediately after WWI. I wish I knew how to post charts. If I find a good link, I'll post it. There was quite a spike in prices especially right after WWI. 9. The hyperinflation in Germany was very destabilizing to the German economy. 10. Problems in international exchange rates caused by the fact that most of the world's gold was held by the United States and France. More to come . . . . The US kept interest rates low around 1927 in order to discourage gold from flowing into the US, apparently, in order to stabilize the Bank of England. This according to Benjamin Anderson, Economics and the Public Welfare, pp. 177-191.