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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (43182)	1/13/1999 12:24:00 PM
From: Mike M2	Read Replies (1) \| Respond to of 132070

Mike, history repeats: some tough love tales from the November Richebacher Letter " The unexpected ,rapid weakening of the economy later in 1930 triggered growing anxiety in the financial sphere. This was initially reflected in the plunging stock prices and rising interest rate spreads. But while the economic crisis had been developing for several months, the banking crisis struck late in the year, in November -December. Another aspect of the following sequence of the banking panics, widely overlooked, is that these originated in reality in the disruption of the securities markets. The wholesale destruction of the bank credit and bank deposits during the Depression in America did not come about through bad loans but from capital losses from the collapsing of the market values of lower-grade bonds, which banks held en masse. The effect was also exhibited in soaring interest rate spreads. By the middle of 1932, the spread interest rates on corporate Baa-rated bonds and treasury bonds had surged to above 7.5% , more than three times their level before october 1930. This contagion through the securities markets, by the way, also explains the speed with which the banking system reacted to bad economic news, as capital losses took place instantly." The Richebacher Letter 1217 St. Paul Street, Baltimore, MD 21202 Mike