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

To: THE ANT who wrote (113837)	10/17/2015 9:26:21 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 219783

Economic depressions are caused by misdirected capital and as you suggest can be made far worse with policy mistakes. WW-I created far higher than normal prices for commodities which caused farms to expand in America, Asia, Latin America, Australia and New Zealand. The quantity of manufactured goods produced increased and many of them were destroyed shortly after they were made. Huge investments were made around the world to meet this temporary increased demand. By 1920 agricultural output in Europe had resumed and both agricultural and industrial prices were in huge decline. France, England and Germany entered what UCLA historian called "The Hollow Years" as there were no jobs waiting for returning service men and workers were hit with spreading waves of lay-off and unemployment. The capital invested in expanded farms and additional factories investment had lost much or all of its value. Up to that point, this was an economic depression caused by misallocated capital. We experienced a different dislocation of equal magnitude after 1990 when Eastern Europe and China returned to the global economy. This created a lot of economic opportunities and fortunes - and also destroyed a lot of jobs and destroyed a lot of invested capital. Looking back, we mistakenly recall the economic depression of 1920 beginning nine years later in 1929 and we recall the economic depression of the 1990s starting about nine years later in 2006. That's the very limited influence of central banks and governments. They don't create economic depressions. But they try to ameliorate them, which tends to postpone the worst of the economic depression and reapportion where the worst damage takes place.