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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (27963)	3/7/2005 4:18:07 AM
From: Elroy Jetson	Read Replies (3) \| Respond to of 110194

Yes, China's policy, of selling us exports in exchange for dubious US paper money and notes, echos the imbalances which resulted in the Great Depression. Both periods were preceded by debt-financed over-capacity in almost every industry and a tendency toward deflation. In both eras, rather than liquidate over-capacity and the debt which created it (accepting a serious recession in the process), the economies of the world were made into a hollow sham prosperity through monetary creation. As Charles Rist noted in 1933, "A policy aimed at monetary stability will secure a relative stability of prices, but the economic history of the 1920's teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation." Or as Joseph Schumpeter said, "Policy does not allow a choice between depression and no depression, but between depression now and a worse depression later." "Monetary inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar (WW-I) experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy." At least China's inane policy today seems somewhat more plausible than Fed Chairman Benjamin Strong's gold for paper exchange 75 years ago. At the time, the UK was not a major market for US products. In fact 95% of the US GNP was internal - only 5% of US annual commerce relied on foreign trade. But regardless of the motivations of the various players, it seems likely that our current era will continue to rhyme with the 1930s - if only because few seem interested in the lessons of the past. .