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Pastimes : Book Nook -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (403)	2/15/2002 8:20:01 PM
From: Ilaine	Read Replies (2) \| Respond to of 443

I haven't worked that part in yet because I haven't looked at it in depth yet. However, my impression is that this was not considered to be a serious problem in 1929. The "evil" of margin accounts wasn't that the account holder massively leveraged the account, it was that credit was being used for "speculation" rather than "productive uses" which is a Bad Thing. I haven't yet seen a good definition of "speculation." BTW, it won't ever be "cast in stone." The plan is to get it out on the web, have an email address just for that purpose, and invite constructive criticism. When I have gathered together a reasonable amount of writing, I will tack it up but it will probably always be under construction. Here is the bit that explains why: Rather than attempting to identify the causes of the collapse, many writers simply throw up their hands. For example, in The Economic Lessons of the Nineteen-Thirties, H.V. Arnt stated, "No attempt can be made here to analyze the causes of this catastrophic collapse." Most economists focus on the transmission of the financial collapse of 1929-1930 and skip over the causes. For example, in "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," Ben S. Bernanke states, "It should be stated at the outset that my theory does not offer a complete explanation of the Great Depression (for example, nothing is said about 1929-1930)." The "new orthodoxy" among economists is that the Great Depression became a global phenomenon due to the instability of the mechanisms of foreign exchange, especially the gold exchange standard, adopted at the Genoa Conference of 1922. These economists have carefully detailed how the return to the gold standard in 1925 by Great Britain at pre-war parity caused massive unemployment, how in order to stay on the gold standard Germany was forced to chose between devaluation and deflation (Bruning chose deflation), how the United States Federal Reserve adjusted the interbank rate in order to accommodate the return of other countries to the gold standard, especially Great Britain, and much, much more, all demonstrating a deliberate policy of deflation commencing in 1925 and culminating in 1931-1934, when Great Britain, the United States, and Germany, among others, were all forced off the gold standard. Yet, these same economists have described the sharp decline in aggregate consumption in the United States in 1930 as "autonomous" (by which, apparently, they mean that they are unable to define the causes). ~~~~~~~~~~~~~~~~~~~~~~~~~ Actually I am not positive Germany was forced off the gold standard at that time.