Saturday, February 12, 2011

Yes a bit of tightening in 1934 was needed

In order to match the Fed with the real economy  and prevent skewness.  Then a slight easing in 1935.  Unfortunately the Fed. at the time. was not nearly as accurate as this backward computed chart.  Never, by the way, will the Fed have data accurate enough to change as fast as the economy.  The problem is the Fed is central planned, the economy is not, so the control knobs usually cause skew in the periphery.

By 1936 the game was up; the French, and  Hitler had  made the European skew so much worse  that we had link failure.  Looking back at the events of WW2, I think I would have shut down the central banking system entirely in 1934, and told Europe I would starve them until they fixed the internal skew.

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