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

To: Maurice Winn who wrote (69691)	12/16/2010 8:40:40 PM
From: Ilaine	1 Recommendation Read Replies (1) \| Respond to of 217885

I do not rotate the map. North is north, and stays north. To do otherwise would give me a very bad headache. Can't even imagine it. Brrrr. I do respect Thomas Sowell, on the whole, but wonder if he is aware that statistics on unemployment early in the Great Depression are dodgy. The data sets, for the most part, are annual, and aggregate the entire nation, not sectors. You can see that something bad is going on but you can't tell why. Christina Romer did some good work using consumption of "durable goods", that is, expensive consumer goods, e.g., large appliances (refrigerators, stoves, washing machines) and department store sales, that was reported by month. j-bradford-delong.net She also showed that the Great Depression started at about the same time all over the world, which tends to indicate that the beginning could not be blamed on any one country's monetary policy. All over the world there was a cratering in production, which is partly explained by the cratering in consumption. j-bradford-delong.net But she focuses on the autonomous drop in consumption, which had devastating effects. That's only one small part of the puzzle. A spiral of debt-deflation is by far the greater part and in large part explains the autonomous drop in consumption. The world (that is to say, Europe and the United States) went back onto the Gold Standard at pre-war exchange rates, which inexorably led to devaluation of the currency and thus to deflation. Deflation is deadly to credit, because you can't pay back what you borrowed without spending capital. My own theory, which I hope to detail in the future, has to do with the monetary policies of France and the United States to hoard physical gold. If money has to be backed by gold, and there is no gold, then there is no money. If there is no money, there is no credit. If there is no credit, there is no debt-financed-production and there is no debt-financed-consumption. Crash. As someone who lives in a house financed by debt and drives a car financed by debt, who got a law degree financed by debt, whose children got their own educations financed by debt, I think that consumption financed by debt can be a Good Thing. If inflation is in our future, even better. But if deflation is in our future, not so good. Heavy deflation causes heavy deleveraging. Crash, thud. Anyway I am just rambling. The best book of 2010 is Michael Lewis's "The Big Short." Read it. The facts are too crazy to believe but they really happened. amazon.com