07-14-2012, 07:08 PM
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Confirmed User
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Join Date: Mar 2002
Posts: 8,234
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Quote:
Originally Posted by Sunny Day
The Fed was created in 1913 not 1929. The Depression was caused by bankers who took every dollar and invested in Wall Street, other hair-brained schemes or just plain stole the money. The trouble in 1929 was like every other investment bubble.
Same damn thing happened when Regan deregulated the savings & loans. Instead of investing in mortgages they started investing in strip joints and any con man claiming to own a gold mine or oil well. System worked from the '30s until deregulation in the '80s. Same thing with banks.
If your theory of the Fed is to blame, we would have had the disaster before WW I.
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The fed didn't start tampering with the interest rates until the mid 20's. There's a quote from Peter Schiff that described the recent housing bubble, and it goes something like this, "The bankers were just drinking the alcohol that the fed was pouring". In other words, the artificial economic environment created from the federal reserve with unrealistically low interest rates provided the ability for bad decisions/investments to occur. It wasn't ever stable, same thing applies for the great depression. People just didn't go ape shit and make bad decisions for no reason at all, it's because of the federal reserve distorting the market.
Here's a good/short read about it:
http://fskrealityguide.blogspot.com/...epression.html
Quote:
In the mid 1920s, the Federal Reserve used its cartel power to set interest rates at a really low level. This caused inflation and an economic boom. Politically-connected insiders knew that an economic boom was being created. At the start of the boom, they loaded up and debt and bought assets before inflation set in.
The Great Depression is blamed on "greedy speculators". With artificially low interest rates, it made sense to borrow and buy assets. If interest rates are 2% and inflation is 10%, then borrowing to invest is sensible. Many farmers and small business owners were forced to borrow to expand, to keep up with their competition.
The "greedy speculators" were acting independently in the "free market". The Federal Reserve and negative interest rates were the real culprit. The speculators were following the false signal the Federal Reserve was sending via artificially cheap interest rates.
In 1929, the Federal Reserve insiders decided to jack up interest rates worldwide, causing a depression. The insiders knew what was coming. They stopped issuing loans and converted all their holding to cash.
At that time, the Federal Reserve did not publish its interest rate target to the general public. The Federal Reserve did not publicly state in advance whether it was planning to raise or lower interest rates. Even in the present, someone who knew in advance about a Federal Reserve move could profit immensely.
The insiders had converted their holdings to cash before the crash. After the crash, they were able to buy assets at a huge discount. Since they were unleveraged, they were able to borrow and buy up even more assets at the bottom of the Great Depression.
In 1933, President Roosevelt confiscated everyone's gold, defaulted on the dollar, and declared the USA bankrupt. The dollar was devalued relative to gold, from $20/oz to $35/oz. Since the dollar was no longer redeemable in gold, this allowed a further increase in the money supply. The insiders who borrowed to buy assets at the bottom of the Great Depression were allowed to default on their loans, repaying their debts with devalued dollars. Many loan contracts contained "gold clauses" requiring payment to be increased if the dollar were devalued relative to gold. Congress declared these "gold clauses" invalid, ripping off creditors and providing a massive subsidy to debtors.
In this way, politically connected insiders profited from all three legs of the Great Depression. They profited by borrowing and buying assets at the start of the boom. They were first in line to buy assets with the newly printed money, so they were the primary beneficiaries of inflation. Due to their political connections, they were able to foresee the crash coming. They converted their holdings to cash before the crash. At the bottom of the Depression, they were able to borrow and buy assets at a discount. Later, they were able to default on these loans via inflation; inflation meant these loans could be repaid with devalued dollars.
Insiders profit in this manner EVERY TIME there is a boom/bust cycle. The Compound Interest Paradox means that boom/bust cycles are an inevitable consequence of debt-based money. No matter what the Federal Reserve does, there will be boom/bust cycles. Insiders who know what the Federal Reserve is going to do have the opportunity to profit immensely.
The Great Depression accomplished several goals. It forced small farmers off their land when they were unable to repay their mortgages. It forced many small businesses to close. It caused the cartelization of many industries. Conditions of great poverty enabled the welfare state apparatus to be put into place. The Great Depression converted the USA from a nation of farmers and small business owners into a nation of wage slaves.
Nowadays, boom/bust cycles as severe as the Great Depression are no longer needed. The independence of the average American was permanently broken during the Great Depression.
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