[ExI] Sudden outbreak of democracy baffles US pundits

Stathis Papaioannou stathisp at gmail.com
Sun Oct 12 09:46:51 UTC 2008

On 2008/10/12 Damien Broderick <thespike at satx.rr.com> wrote:

> Barbara Lamar, who knows a great deal more about finance than I do,
> comments:
> <What this piece leaves out is the part the Federal Reserve Bank played in
> all this. That's the key. Arguing over which specific lenders are most at
> fault is a red herring, a straw man, a distraction aimed at taking people's
> attention away from the actual cause of the problem.>
> Earlier, she'd remarked in regard to a recent piece [Oct 7] by the NYT's
> tame Republican David Brooks:
> <Without the kind of manipulation of money and credit by central banks we've
> had over the past four decades, there would be short, swift corrections in
> the market whenever speculation gets out of hand in one area or another --
> not the prolonged global meltdown we are witnessing and will live through
> for the next several years.

In the 1920's, the Coolidge administration favoured business, reduced
taxes, promoted free market mechanisms rather than government
regulation. The result was a speculative bubble ending in the 1929
stock market crash. But what lead to the great depression rather than
an ordinary recession was the inaction of government and the central
bank after the crash, allowing banks to fail and the money supply to
contract, because using fiscal and monetary policy to correct it was
anti-free market.

Stathis Papaioannou

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