More recently, it has been the prevailing belief among economists that the stock market crash of 1929 was not the primary cause of the Great Depression, pointing to telltale signs of an imminent economic disaster in various statistics leading up to the Depression as well as the downturn in Europe which was already in progress. Today the most widely accepted theory is the one advanced by Peter Temin: the Great Depression was caused by catastrophically poor monetary policy pursued by the United States Federal Reserve during the years leading to the Great Depression. The policy of contracting the money supply was an attempt to restrain inflation, which exacerbated the actual problem in the economy, which was deflation.
128shot said:Isn't that what caused the great depression is fed reserve spending?
from: http://en.wikipedia.org/wiki/Great_Depression#Causes_of_the_Great_Depression
So, why are they still around if they are a root in the problem of this great catastrophy?
The prolonging of the recession - and the sharp downturn in the economy in the 1937-38 period - was a failure not of monetary policymakers, but the federal government.
oldreliable67 said:Good point. But -- and this has been debated long and hard -- the misguided (IMO) policies of the Fed early on, in 1929 and for a while following, put in place conditions which made the economy much more vulnerable to fiscal policy mistakes. There was plenty of blame to go around.
the Great Depression itself was solely the result of federal government policies.
oldreliable67 said:Arguable. And has been ad nauseum by many folks certainly brighter then I and probably more-qualified than either of us. We can trot out all the old arguments and supporting stats if you want, but frankly, I would just as soon leave it that good arguments can and have been made for both points of view. Instead, I'm going out for a :drink !
perhaps you are trying to say that monetary policy was the primary cause of the prolonged nature of the Depression (not the busts in 1929 and 1938, which we both agree were triggered by the Fed)?
oldreliable67 said:Nah, I'm saying that I'm just not in the mood to get into this again just now! There were so many really good papers written on the subject in the 50s, 60s and even into the early 70s and it was such a popular subject of debate and analysis that frankly, I just about OD'ed on it! Yeah, I've been doing this stuff for a long time! And to do the subject justice, I would have to go dig out some of my old papers - and after having moved around a bit since then, I have no clue where they are right now!
It is a great subject, and you sound like you might be a lot like I was: especially interested in the history of economic thought, etc. Good stuff.
What sticks in my mind just now is the frequency and intensity of debate during the period as to the appropriate policy prescriptions. The leading contender was, of course, Lord Keynes. Others desperately wanted a more 'classical' approach. Say's Law was still pretty big and widely debated.
Tell you what, the more I type here, the more the juices are getting to flowing again -- I'll scrounge around a bit tonite and see what I find and maybe post up something on the morrow. Howwzzatt?
But you quoted one of my statements and said it was "arguable".
oldreliable67 said:Ah, serendipity! ...
Its nice to be in such good company. And to know that the brain is not completely fried! The entire text is at...
http://www.federalreserve.gov/boarddocs/speeches/2004/200403022/default.htm
The idea that deflation and credit contraction caused the Great Depression was conceived by eminent economists such as Friedman and Schwartz. They based their theory on flimsy empirical evidence rather than logical reasoning...For a refutation of the alleged statistical correlation between deflation and depression in that time period,
Deflation and depression do seem to have been linked during the 1930s. [
oldreliable67 said:And speaking of Ether, he/she wrote:
But from the paper cited by Ether to support the above assertion:
So, is it just me or does there seem to be a logical disconnect between Ether's assertion about the conclusions he touts versus the actual conclusions?
Now, I must admit that I read only the abstract; I didn't spend the $5 necessary to read the entire paper. Am I missing something, or is there explanatory material in the text that mitigates the above statement taken from the abstract?
Perhaps if Ether is still following this thread, he/she could clear up this apparent disconnect?
if you like esoteria of macroeconomic monetary policy.
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