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

To: bart13 who wrote (71568)	10/11/2006 1:06:19 AM
From: JF Quinnelly	Read Replies (3) \| Respond to of 110194

Individuals were prohibited from owning gold in 1933, but gold still backed the money supply in various degrees until 1973. FDR's revaluing the exchange rate of dollars to gold increased the monetary base by nearly 75%. The money supply collapsed in the early '30s due to the failure of non-money center banks. In the 3 year period of 1930-33 some 30% of the American money supply evaporated as small banks failed. There was no deposit insurance, and the Fed didn't or couldn't arrange for the sort of rescues and mergers that it uses today when banks fail. The US banking system was vulnerable to this sort of collapse in part due to prohibitions on branch banking that didn't exist in Europe.