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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (843)	9/30/1998 5:41:00 PM
From: Freedom Fighter	Respond to of 1722

>>It is historical nonsense that we did nothing early on until FDR came along. (albeit universally believed) Hoover despite his reputation was very active in trying to prop up the excesses. It is documented.<< >It is well documented that Hoover made great humanitarian efforts.< In Murray Rothbard's THE GREAT DEPRESSION, Hoover's activist government policies are detailed. He was not the Laissez-Faire president that political opponents and history portray him to be. Contrary to popular belief he urged the Fed step in to add significant reserves to the banking system during the week of the crash. The Fed DOUBLED its holdings of treasuries in the week of the crash. That is super massive liquidity. In fact I have a copy of the 1929 NY Times article that verifies Rothbard's claim. They were trying like hell to increase the money supply. Unfortunately, they were pushing on a string much like Japan is now. I don't know where that fairy tail about the Fed tightening comes from, but I have the article in front of me right now. They were flooding the system with money. He pushed for all governors to be active in STATE level public works programs. He funded the department of congress for public works. He added significant farm subsidies. The list is quite large. I could go on. >>I suspect that giving Roosevelt credit for getting us out of the depression was one part political revisionist history and one part lack of understanding of the facts. The credit facts vs. GDP are not refutable though. I have them in a chart.<< >Statistical coincidence is not irrefutable proof of anything in the social sciences -- because there is no way to re-run history changing only one variable. Therefore, there are no controlled experiments, and hence, nothing approaching proof.< It is not proof, but almost every bust in history that I am aware of was preceded by a credit boom. (Including Asia) The credit excesses of the 20's are not debated among scholars or historians. The collapse of credit isn't either. It may be a coincidence but it's a damn impressive one. Especially since in the late 20's prior to the crash, when all the conventional economic thought was that it was different this time, Ludwig von Mises was running around the world saying a very big bust was imminent. Something that wasn't a usual thing for him to be saying. >>But just letting the system collapse was a prescription for being taken over by the Communists or their Fascist imitators. It is argued by some that government disaster relief encourages people to take unnecessary risks the next time around. But, the political reality is that a government that doesn't provide disaster relief will get replaced by one that "promises" that it will. Often, the replacement government winds up being the biggest disaster of all.<< I agree completely and 100%. The point then becomes do government interventions prevent the collapse, delay the inevitable, cause the imbalances to accumulate and create a bigger collapse down the line or what. I see an economic system much like I see the human body. Credit expansion beyond what is justified by savings (which is the system we have now) is sort of like heroin, cocaine etc... It makes you feel great for a while. The withdrawal (recession/correction) is uncomfortable. Adding another shot or snort to prevent the correction gets you through the rough period but makes the next episode more difficult. It goes on and on. And much like the human body, it can take many cycles or decades before the abuse begins to manifest itself in ways that are not so easy to correct. Ultimately a system runs out of prop up bullets. That may be where Japan finds itself now. They can't lower rates any more. If they print money the currency comes under pressure. The true government liabilities are enormous. This was a multi-decade phenomenon. For decades after the US depression, government intervened, but only after the recession had liquidated at least most of the problems. Outright prop up intervention is a recent 15 year phenomenon.