How can you say the Federal Reserve caused the Great Depression when monetary policy was confined by the gold?Author: admin // Category: franklin mortgage
standard. There was a “Great Depression” in the 1870s longer than the Great Depression of the 1930s. How do you explain that one, there was no Federal Reserve then. The confines of the gold standard meant that there was little government or anyone else could have done to end it.
The depression in the 1870’s is measured from 1873-1879.
The Great Depression is measured from 1929-1941.
Which one was longer?
"The Depression of 1873-1879 was precipitated by the bankruptcy of the railroad investment firm of Jay Cooke and Co. but the deeper cause was the restrictive monetary policy of the Federal Government. The U.S. was on the Gold Standard but the increments in gold holdings was not sufficient to keep up with the demand for money resulting from the growth of the economy. Consequently there was deflation. This meant that even if the nominal interest rate were zero the real interest rate would be positive.
The U.S. had experienced a great boom in railroad building that had maintained high levels of demand for the iron and steel industries. When the profit rate for railroad building dropped below the real rate of interest the railroad building stopped and the production of iron and steel had to drop drastically as well. Jay Cooke and Co. was just the first of about ninety railroads that went bankrupt."
From San Diego State University Dept of Economics
One could argue that the US system of Mercantilism that was entrenched by force-of-arms in 1860 wanted to thin the herd for their favorites who could snap up miles of rails and equipment at bargain rates.
On a more contemporary note, the future suppliers of "green electricity" don’t have the lines necessary to deliver their product. What better way for those transmission lines to be had than by bankrupting the power companies that own them?
The policies of FDR did not end the Great Depression but rather extended them by 7 long years.
The power lines in the South that delivered cheap coal and hydro generated power that finally did start some real “Reconstruction”, after 80 years of waiting, will soon be up for grabs if Cap and Trade gets through the Senate.
Report of the National Emergency Council (Washington, DC: Government Printing Office, 1937)."Eight decades after the end of Reconstruction, the National Emergency Council created to examine the Depression of the 1930s reported its findings to President Franklin D. Roosevelt: The South, it said, had been reduced to the status of a colony."
The nationwide cycle of "booms" followed by "busts" are the result of the only agency that has the power to act on a nationwide scale: the government.
Capital mal-investments occur on a large nationwide scale only by the government over-riding the checks and balances provided by the free market, i.e., making money "cheap" (forcing banks to lower the rate of interest) by "expanding the money supply". This "cheap" money results in irrational investment into industries that would appear unprofitable if the government did not intervene into the money supply.
This is exactly what the changes made by Clinton to the “Community Re-investment Act” did in the 1990’s to the housing and mortgage industries.
If not for those changes, we’d have never heard of Zero-down sub-prime mortgages or mortgage derivatives and this crisis “opportunity” for democrats would not have materialized.