Presidential election, 2016

[Galen]

(11-14-2016, 03:34 AM)Warren Dew Wrote:

(11-14-2016, 03:04 AM)Galen Wrote:

(11-14-2016, 02:48 AM)Warren Dew Wrote: The fed existed already, and could have refrained from raising discount rates.  More speculatively, they could have aggressively added banks to the federal reserve system, and Hoover could have pushed legislation similar to the 1933 banking act.  Deposit insurance would have helped a lot given the large number of banks that failed due to runs rather than to fundamental insolvency.

While FDR's policies were in general counterproductive, it's hard to argue that he didn't do something better than Hoover with respect to the money supply:

Remember that banks loan out the majority of demand deposits and if those loans go bad and aren't repaid then the money still disappeared.  As a consequence the money multiplier effect of fractional reserve banking still goes into reverse.  In the early years of the depression the Fed's attempts to reflate the banking system was pushing on a string.  Based on this I would argue that the banks going under was an effect rather than a cause.

Deposit insurance would have helped with the bank runs but the money supply would still have contracted.  It is unclear if the contraction in the money supply wouldn't have as large as a consequence.  That is the problem with economics, it is not possible to run controlled experiments.

Keep in mind that FDR devalued the dollar with his gold confiscation and setting the price to $35/oz.

I agree some banks were insolvent due to bad loans and would still have failed.  However, many banks were failing due to runs even though they were solvent.  Those banks could have been saved.

Good point about dollar devaluation.

Perhaps but as Mises would say the first intervention creates problems that have to be solved which leads to further interventions and the sequence never ends.  The bust always makes a big mess.