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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: paintbrush who wrote (44243)	12/22/2008 5:45:54 PM
From: TobagoJack	Read Replies (1) \| Respond to of 219903

topic, collapse progression, sub-heading, towards zero, just in in-tray re: "in 29+ they contracted money/raised rates." i thought i had dispelled that rumor. the Fed's balance sheet expanded by over 400% from 1929 to 1932, and it cut rates from 6% to 1,5%. Reserves under the Fed's control expanded dramatically throughout the depression, but broader money supply measures still fell in the early stages of it due to reserves outside of its control contracting even faster. it was the only time in history when the Fed pumped up base money at a speed comparable to the present time. an interesting similarity: cash in circulation rose real fast in 1929-32, as people withdrew money from the banks due to the reasonable fear that the banks might go under. the same is happening again - i.e. money in circulation has begun to rise rather noticeably. the question of whether anything changes in 09 hinges on whether demand for cash will fall and people will start to borrow and creditors start to lend in 2009. i rather doubt that actually, given that a large percentage of the population is up to its eyeballs in debt, and there is little chance that lenders will see risks as diminishing in '09. we may get a false dawn similar to January - April 1930 (heralded by a slight rise in stock prices), but one must not forget that the biggest credit bubble of all time has burst. it has no equivalent in history, and its unwinding will likely be a long term affair. what the fed has so far done in terms of putting fingers into the holes in the dike pales compared to the losses in phantom wealth that have occurred and continue to occur. the attached chart says we're still only at the beginning of the unwinding process.