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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 (71790)	10/12/2006 11:37:04 PM
From: JF Quinnelly	Read Replies (2) \| Respond to of 110194

As far as I know, you are completely alone in thinking that has anything to do with my original points about the lack of relationship between the gold and money supply after 1933, which is what originally started this thread. The Triffen Dilemma was the largest problem confronting American fiscal and monetary authorities in the decade of the 60s. It effected not only monetary issues, but foreign policy as well. It was entirely due to the constraint that the gold exchange standard put on the dollar. Once the Bretton Woods agreement was abrogated the dollar was no longer linked to gold in any fashion, and the inflation of the 70s was the predictable result. The correlation between gold and the money supply from 1913 to 1933 was tenuous at best, as you noted about the WWI period and as I add about periods like the huge growth in 1919-20, the drops in 1920-21, the large growth of the various elements on money supply and credit from 1922-25 and the huge drops in money supply and credit starting in about 1928 and ceasing in 1932. The correlation between the dollar and gold was not tenuous during that era. The growth and drops of the money supply in the teens and early 20s was due to gold shipments to and from the US by European powers during and after WWI. The American banking system worked to 'sterilize' the incoming gold to prevent inflation. The money supply contracted as the gold was repatriated following the war. The growth of the money supply in the late 20s was due to overexpansion of credit. I believe you won't find the money supply shrinking as early as 1928. The stock market collapse didn't shrink the money supply. The collapse of the money supply happened from 1930-33, and was entirely due to the failure of small non-money center banks. It was an American phenomenon, and made the Great Depression worse in America than in the other major economies, whose banking systems weren't affected as our was.