PeterA Good to see you lurking -- Operation Phoenix

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Subject: PeterA Good to see you lurking

Author:
Allen Currie

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Date Posted: 18:26:46 04/29/12 Sun

It is interesting that the next day after I speculated in the post that the first rule of holes was to stop digging, I read John Mauldin in last weeks column which included a speech by Jim Grant to the fed. In the excerpt below he is speaking about Willis who wrote in the early thirties.

"In 1917, after the United States entered the Great War, the Fed set about monetizing the Treasury's debt and suppressing the Treasury's borrowing costs. In the 1920s, after the recovery from the short but ugly depression of 1920-21, the Fed started to implement open-market operations to sterilize gold flows and steer a desired macroeconomic course.

"Central banks," wrote Willis, glaring at the innovators, "...will do wisely to lay aside their inexpert ventures in half-baked monetary theory, meretricious statistical measures of trade, and hasty grinding of the axes of speculative interests with their suggestion that by doing so they are achieving some sort of vague 'stabilization' that will, in the long run, be for the greater good."

As I read the history of the “short but ugly depression of 1920-21” there was little or no government interference in that depression so it was short, but history also says that government interference was far greater in the ‘30s and almost certainly extended the pain greatly.

It just goes to prove something I have believed for a long time – Government will do the absolutely right thing to solve some other problem at absolutely the worst possible time. Now that government has achieved much more adsvanced tools I expect much more pain.

That speach was a classic in dry humor and perfect swordsmanship worked on the vests of the Fed.

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