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To: Knighty Tin who wrote (214681)	1/15/2003 12:41:33 PM
From: Mike M2	Read Replies (1) \| Respond to of 436258

KT, yes my interest in austrian economics is primarily to understand what's wrong with the economy. I think if we could reduce the meddling it would be an improvement. Mike

To: Knighty Tin who wrote (214681)	1/15/2003 12:42:06 PM
From: Tommaso	Read Replies (1) \| Respond to of 436258

Actually wasn't the secretary of Treasury and a bunch of other top officials yelling, "Liquidate the debts, liquidate the banks, liquidate the farmers, liquidate the mortgages, liquidate, liquidate, liquidate!" about 1930? Guess it's somewhere in Galbraith's book. Think I'll try running "Lquidate, liquidate,liquidate" in Google . . . Well, here's Peter Bernstein in an interview--not the original quote, but a good summary of what I take to be Austrian economics applied practically: That's real, but it's not really real about 1929. The crash itself in 1929 was on the order of 20-25 percent, which when they used to be bear markets, not like today, 20-25 percent was a normal bear market. So it was bad and it was painful and those few days were real panics. But then things quieted down and 1930 was kind of a spooky year. I've always thought it was a year that deserved more research and attention, because the market rallied back. It didn't get back to 360 on the Dow, which had been the 1929 high, but it rallied back in the spring and there was a sense that maybe the worst was over and everything was going to be all right. Business activity was getting weaker. There was a genuine recession going on, again, nothing bad, kind of conventional, but the business activity was getting weaker. But at the end of 1930, a bank called Bank of United States, not "Bank of the United" -- Bank of United States, a small bank that was really what we called an uptown bank, but had recently opened a Wall Street address, that bank had a run, failed. And, there was some sense that the other banks should have gotten together to support it, but they didn't. This was a bank with Jewish ownership and largely Jewish customers. So a lot of small people. And so when the Bank of United States failed, not only was it a New York City bank, but it was a bank of the United States, it triggered more runs. And then the banking system began to go down and the bankers were already very scared because they'd lost a lot of money on the broker's loans when prices went down so fast, that they couldn't get back what they had lent. And so following that, raw material prices were falling, as happens in a business recession, but, business in Europe was also slow. So price of copper and wheat and that kind of thing were beginning to go down. So the banks were very scared anyway and when the runs began to hit the banks, which is really the story of 1931, that's when people really were getting into trouble. And business firms couldn't refinance their own loans and there was just a kind of a general wave to liquidate-liquidate-liquidate-liquidate. And that's when people really got frightened. And when people couldn't renew their mortgages -- in those days a home mortgage was not an amortizing mortgage the way it is now, where you pay a little bit off every month. It all came due on a date and you either had to refinance it or find the money or your house would get sold. And the banks didn't want to refinance the mortgages at the old rates. People couldn't find the money to pay down their loans. And so all of that was added to the general desperation. The government, in its wisdom -- this was not a Republican, a parochial Republican view; the Democrats agreed, that the deficit that was created -- the budget deficit was created because tax revenues we're falling, was terrible. That was only gonna make things worse. And so in 1931, income taxes were raised and then in 1931, tariffs were raised. All the wrong things, in retrospect. And there was concern that the dollar would be weak because money would leave the United States and so the Fed Reserve raised interest rates. Everything was done to make it worse

To: Knighty Tin who wrote (214681)	1/15/2003 12:48:07 PM
From: Tommaso	Read Replies (1) \| Respond to of 436258

Still looking, but got: Liquidate: The most traditional, conservative response was the one offered by the longtime Secretary of the Treasury Andrew Mellon: "Liquidate capital, liquidate labor, liquidate everything." In other words, let the downturn in the business cycle run its course; get rid of weak companies and inefficient workers. Not surprisingly, by the winter of 1932-33, with production and employment stuck at about 3/4 of their 1929 capacity, this solution seemed increasingly less attractive.

To: Knighty Tin who wrote (214681)	1/15/2003 1:54:29 PM
From: Freedom Fighter	Read Replies (4) \| Respond to of 436258

KT, >I'm just wondering if anyone in history ever gave the Austrian School a try in the real world.< It would not only require a hard currency, something like the gold standard, but ALSO the elimination of fractional reserve banking. I do not believe there is any modern example of both of those. Without both, the excesses can always get large enough to prevent a politically acceptable liquidation. In 29, we had gold, but "with" fractional reserves and paper too. IMO, the real political challenge is not in convincing a democracy how to cope with the liquidation of excesses. IMO the excesses would always be tolerable if we really had sound money. The political problem is in teaching the public how excesses actually form and who really benefits and who gets hurt when you inflate, socialize banking risks, and have fractional reserve banking. Wall St and the Federal government will never give up a system that allows them to transfer wealth from from Main St to themselves via the backdoor. Politicians would rather inflate than raise taxes. Bankers like to lend money they don't have and then get bailed out. Wall ST likes Nasdaq 5000, good deals, bad deals, any deals, bailouts, commissions, IPOs at 10,000 times earnings, rape and pillage etc... IN other words, excesses are good for Wall St. They make a ton of money, give themselves bonuses and then who cares. Just blame someone or something else. The Austrians want gold to anchor the system. I believe there ARE problems with gold, so I would prefer another anchor. I just can't come up with a better alternative.