The Soaring 20’s –What made the decade before the Depression so special?
It’s not surprising that there has been a resurgence of interest in the economics of the Great Depression–and not just because of the economic meltdown we’ve experienced over the past months. So much of what happened back then shaped economic policy, financial markets and even the way we thought about the economy for decades to come. Equally important, however, and much less discussed, is the decade prior to the Great Depression. This was a period of remarkable transformation, both economic and social. That the decade gave rise to a number of misguided policy responses (by both the Hoover and Roosevelt administrations) says a lot about how little influential people at the time understood what was driving that transformation.
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Easy credit.
Easy credit, aka. money expansion. A technology boom with attendant irrational exuberance. A credit-driven housing boom. A credit-driven stock market boom. Accounting fraud. Government subsidies. You know. Stuff that could never happen again.
Please read ~The best article ever on the central banks
http://www.financialsense.com/fsu/editorials/dollardaze/2007...
Please note the roaring 20's and the money supply .
"Obamney care," Nuff said.
An excerpt
From 1921 to 1929 the Federal Reserve increased the money supply by 62% thus fuelling the period known as the Roaring Twenties. Further fuelling the rise in stock market indices was a new type of loan, known as a margin loan, whereby an investor would only need to put down 10% of the value of a stock with the remaining 90% being loaned from the broker. Like today, these loans could be called in at any time and had to be paid within 24 hours, known as a margin call. This is typically accomplished by the selling of the stock purchased using the loan.
"Obamney care," Nuff said.
These two factors
These two factors, loose monetary policy and easy loans resulted in a fivefold increase in the Dow Jones Industrial Average over the latter half of the 1920's.
"Obamney care," Nuff said.
Sound familiar ?
Then, instead of expanding the money supply, the Federal Reserve contracted it, thereby creating the period known as the Great Depression. Congressman Wright Patman in A Primer On Money, reported that the money supply decreased by eight billion dollars from 1929 to 1933, causing 11,630 banks of the total of 26,401 in the United States to go bankrupt. This allowed central bankers to buy up rival banks and whole corporations at a deep discount.
"Obamney care," Nuff said.
I'm no expert but,
the Glass-Steagal act was passed after the great depression began to prevent such an event from every happening again.
This act was repealed recently (was it 1999 or 2003?) and guess what we are in the same predicament.
The roaring 20's was definitely shaped by technological advances, as the article points out.
But, there must have been some financial shananigans going on as well.
Only my opinion, and thanks for posting.
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