Print money and create inflation?

Generali

Good post Dopester.

IIRC, the Fed increased rates a couple of times prior to October 1929. At the time that was blamed for the crash but subsequently it has been blamed on stock prices just being too high.

The biggest policy mistakes were the return to protectionism seen across the world (eg the Smoot Hawley Tarriff Act 1930 in the US) and the dramatic reduction in trade and efficiency that brought about (for more info type 'riccardo' or 'comparative advantage' into Google).

dopester

Generali wrote: »

Good post Dopester.

IIRC, the Fed increased rates a couple of times prior to October 1929. At the time that was blamed for the crash but subsequently it has been blamed on stock prices just being too high.

The biggest policy mistakes were the return to protectionism seen across the world (eg the Smoot Hawley Tarriff Act 1930 in the US) and the dramatic reduction in trade and efficiency that brought about (for more info type 'riccardo' or 'comparative advantage' into Google).

Yes; I can believe it was those policy mistakes for protectionism which contributed to the economic contraction / depression - although I only have a limited knowledge of all the protectionist acts that went on - I will check up "riccardo" this evening.

In fact I omitted that paragraph from section above, but it seems many commentators of the time were unaware of the impact on such Acts or protectionism would prove be.

New York Times

"`... It has been agreed to that the Committee on Rules shall report a rule sending the tariff bill to conference.'"

As the accounts quoted above indicate, analysis of business and investment prospects in 1930 depended on relationships and indicators similar to those we use today. Protectionist trade legislation was seen as a far less important indicator of future economic trends than "easy money."

-William Rees-Mogg & James Dale Davidson (1994)

As early consequence of past depression has been the closure of economies to foreign competition. Tariff barriers, like the infamous Smoot-Hawley bill of 1930, closed U.S. markets to foreign competition.

-William Rees-Mogg & James Dale Davidson (1994)

Generali

dopester wrote: »

Yes; I can believe it was those policy mistakes for protectionism which contributed to the economic contraction / depression - although I only have a limited knowledge of all the protectionist acts that went on - I will check up "riccardo" this evening.

In fact I omitted that paragraph from section above, but it seems many commentators of the time were unaware of the impact on such Acts or protectionism would prove be.

New York Times

Riccardo was a C19th economist and his work on comparative advantage explains exactly why we've managed to increase consumption over the past few years by increasing world trade.

Every politician must understand Riccardo and the implications of cutting off world trade. Obama is making very dangerous noises and if he introduces protectionist measures to appease Rust Belt voters he will be directly responsible for the depression that follows.

chucky

neverdespairgirl wrote: »

That fact that !!!!!! predicts something will happen doesn't mean he wants it to.

!!!!!! predicts a lot of things, some very dramatic and some quite accurate; without a doubt he's a clever man.

however i have never seen a positive post from him that gives the impression that it is actually what he would like. i know they are two different things but it is just the impression that is given.

kennyboy66_2

dopester wrote: »

That is a big myth as far as I'm concerned - or at least misinterpreted - and my books state the Fed embarked on an easy money policy but this just couldn't stop all the forces making for economic contraction after the boom.

It is wholly more complex than just easing the money supply, and it all collapsed for many other reasons - not least for enterprise which was geared only to survive and prosper in the boom was not a good lending risk as trade deteriorated, not lending on properties which were falling in price, nor lending for business ventures that were deemed poor risk or return... and for the general public's preference for low-leverage money (dealing in cash for buying/selling - not credit... although credit did become tight). All the excesses of the boom had to be liquidated.

The stock market crash in 1929 had already been preceded by a downturn in economic activity.

Read 'Friedman's monetary history of the US' if you seriously believe that the money supply had nothing to do with the depression. Cutting interest rates is a sticking plaster in the circumstances.

Here is what Friedman himself said.

"The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government."

There are good statistics on the exact money supply contraction, the number of banks that failed and the response in increasing the reserves of those that survived.

Have you actually read "The road to serfdom" ?
Hayek specifically argues that there is a role for the state when it comes to using monetary policy.

In his own words.
"nothing has done so much harm to the liberal cause as the wooden insistence of liberals on certain rules of thumb, above all the principle of laissez-faire capitalism"

Sir_Humphrey

amcluesent wrote: »

His style of argumentation is straight from the Trotskyist manual: evasion, demanding 'references', strawman, ad-hominem etc.

If I were a Trot, I would not want a bailout as I would want Capitalism to collapse, silly billy. That would then be followed by a dictatorship of proletariat (being a Democrat I would not like that at all).

Keynesianism couldn't be less Trotskyite if it tried!

Why would a Civil Servant like me want a dictatorship of the proletariat? Do you actually know what you are talking about?

lostinrates

Sir_Humphrey wrote: »

If I were a Trot, I would not want a bailout as I would want Capitalism to collapse, silly billy.

I posted elsewhere on my confusion over this (not your opinions or politics but the class of the bailout as 'capitalism'). How can a bailout be classed as capitalism? In capatalism wouldn't the unsuccessful banks be left to rot? (again, not trying to be inflammatory but confused over my understanding of capitalism)

kennyboy66_2

amcluesent wrote: »

> I got the impression that Sir Humphrey was a bit of a socialist at heart<

His style of argumentation is straight from the Trotskyist manual: evasion, demanding 'references', strawman, ad-hominem etc.

Somewhat rich for the person who thinks its a HUGE conspiracy - in your own words.

"Whatever, there's a very big 3-way play going down between the private banking cabal, international socialists and mohemmedans. People, companies, countries are going to be chewed up and spat out. The global danger is another 'Weimar Republic' with nuclear weapons."

I'm only surprised you didn't throw Jewish financiers in for good measure.

kennyboy66_2

lostinrates wrote: »

I posted elsewhere on my confusion over this (not your opinions or politics but the class of the bailout as 'capitalism'). How can a bailout be classed as capitalism? In capatalism wouldn't the unsuccessful banks be left to rot? (again, not trying to be inflammatory but confused over my understanding of capitalism)

There is really no such thing in practice as a true free market economy, just as there has never been a completely command planned economy (although perhaps North Korea comes close). If both the far left & the far right (although they sometimes like to call themselves as classical liberals or libertarians) both oppose the bailout, then it makes me think that its probably the right thing to do.

Sir_Humphrey

lostinrates wrote: »

I posted elsewhere on my confusion over this (not your opinions or politics but the class of the bailout as 'capitalism'). How can a bailout be classed as capitalism? In capatalism wouldn't the unsuccessful banks be left to rot? (again, not trying to be inflammatory but confused over my understanding of capitalism)

I think there is a definition mix-up between laissez-faire (one sort of capitalism that I dislike and has been shown not to work) and capitalism.

There are lots of sorts of capitalism, and the non-interventionist laissez-faire is only one.

The mixed economy (or social market capitalism) is another form of capitalism, which is fully consistent with government bailouts. In the past it was supported by anti-communist socialists (although in reality they are/were social democrats), such as Denis Healy, Tony Crosland and Hugh Gaitskell (i.e most of the old Labour party).

Bailouts are inconsistent with laissez-faire, but not with capitalism. Many communists in fact see the state as an indispensible part of the capitalist apparatus (this I believe is Noam Chomsky's view). There are 101 flavours of communist, many of whom see the others as not being communist, which is the subject of many a deathly boring student arguments.