How can you say the Federal Reserve caused the Great Depression when monetary policy was confined by the gold?
Author: admin // Category: franklin mortgagestandard. 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.
http://www.newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409
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.
February 2nd, 2013 at 10:53 pm
I think we all need to rob them and get our money back since it was unfairly taken by force (tax laws with punishments) in the first place.
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February 2nd, 2013 at 11:40 pm
Depressions always happen somehow but the Federal Reserve was created to stop them and they have failed and should be fired.
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February 2nd, 2013 at 11:50 pm
The only people that clan the Federal Reserve caused the Great Depression are those who ignore history for their own political illusion.
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February 3rd, 2013 at 12:11 am
the gold standard meant America could not spend more then the amount of gold at the rates at that time. we were taken off gold in order to create the reserves
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February 3rd, 2013 at 12:28 am
No FDR caused the great depression with his policies. The Great Depression started as market correction, FDR and his policies prolonged it, The one thing we can credit Hitler with is starting WW2 and ending the great depression!
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February 3rd, 2013 at 1:15 am
Yes – the gold standard restricted the governments ability to create fiat currency, to finance "stimulus"spending . So what Roosevelt did was to make it illegal to own gold. Once the gold was confiscated, he increased the price of gold , in dollars. Inflation the old fashioned way – suddenly dollars were worth less.
Really. Its true. Weird, sickening, but true.
Pretender is right. Read about the depression, we are well on our way to doing all the same things, for the same populist reasons. Only difference : Roosevelt and his "brain trust" brought cheap electricity to many people, while Obama and his "elite smart people" are doing the opposite
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February 3rd, 2013 at 1:51 am
That is actually a good question, better asked in an economic forum. That is the glaring unanswered question that should be asked of Griffin (_The Creature From Jekyll Island_). The main thesis of his book is that The Fed creates booms and busts either purposely or by its incorrect monetary policies. He spends a few chapters talking about the booms and busts that existed prior to the creation of the Fed, subsequently excoriating the Creature (the Fed) but offers no explanation of what went before. If one were to just read his book, history suggests the opposite— that the world and the US has been more economically stable after the creation of The Fed, and then post WWII/Bretton Woods and the current world financial system (about which there are rumblings of yet another model that may be in the workings). Obviously, there is so much more to consider, but blaming the Fed for everything (or bankers, or capitalism) seems a convenient excuse. The one thing I would agree on is that the love of money is the root of all evil (supported by his suggestion about how capitalists financed Communist revolutions as well).
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February 3rd, 2013 at 2:41 am
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.
http://www.newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409
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.
References :