Comments on: Was the money supply not behind the Great Depression?

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Comments on: Was the money supply not behind the Great Depression? http://www.tvhe.co.nz/2008/12/01/monetary-base-vs-the-quantity-of-money/ The Visible Hand in Economics Wed, 21 Jan 2009 19:25:44 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: JO http://www.tvhe.co.nz/2008/12/01/monetary-base-vs-the-quantity-of-money/#comment-10634 Wed, 21 Jan 2009 19:25:44 +0000 http://tvhe.wordpress.com/?p=2181#comment-10634 It could even be a bit more complicated than that. Was the fact that the Fed allowed the massive expansion of the money supply prior to the market collapse the ultimate culprit? In other words, this led to an unsustainable level of indebtedness and risk taking much like we have today. So the Fed sowed the seeds for the 1929 bubble and collapse as it has done again with the current housing bubble and ensuing collapse. Money creation might not matter as much once the bubble has taken form and burst because the “demand” for money will be nonexistent as businesses and consumers attempt to repair damaged balance sheets. This is why velocity matters in the current environment. A second depression here in 2008-09, though not at the extreme of the 1930s, would prove that the Fed pushes on a string when trying to “fix” the economy on the heels of a secular and unsustainable credit market expansion.

]]> By: Is money not a big deal for the Great Depression? « The visible … | debtdeficit.com http://www.tvhe.co.nz/2008/12/01/monetary-base-vs-the-quantity-of-money/#comment-3800 Mon, 01 Dec 2008 19:48:02 +0000 http://tvhe.wordpress.com/?p=2181#comment-3800 […] See original […]

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