This Great Depression thing

We have monetarists, like Uncle Milt, bless his soul, claiming the Fed screwed up. How? Well, just at the stock market peak he restricted some speculative loan activity.  Then the speculative loan activity ran the Call Rate up four points.

This is not a major blunder
This is a normal central banker being off by a year with a minor adjustment. Central bankers do that all the time, heve been, will continue to, and may never stop. They are bounded in the information they have. But more importantly, why were stock traders willing to bid up the call rate at the peak of a bull market? That seems weird, and certainly not the bankers fault.

Discount rate.
After the crash, the central banker lowered the discount rate, and entered the market with everyone else, according to the rate chart.  The market rate and the discount rate chased down the short term rate as fast as they could.  Deflation was the result, exactly what we would expect when the monopoly fiat banker is intent on lower prices.  It is Uncle Milt, bless his soul, who had the sign wrong, and called it the price puzzle ever since.  But I never found any evidence in 1930, 1974, 1981 and 2003 that anything other then the standard happened.  When the monopoly banker is determined to lower prices by lowering rates, or raising prices by exiting the market, we get the same result.  Short term rates follow the price level, they both go up, they both go down.

Money Aggregates.

We are well into the depression, the central bank does not have the control it needs. State banking was obsolete, banking was agglomerating in NYC. It was a technology change having nothing to do with banking, all the major corporations were agglomerating.

Who started the Great Depression?

Hoover, in 1928. I can give you the week, the time, the four or five people, and what Hoover had for lunch.  Hoover met with the broadcast executives and created the modern FCC, allocated the bands and made the networks agglomerate.  The economy needed more chaos in the radio markets. Premature agglomeration of the networks caused the great depression.

Uncle Milt got a sign wrong somewhere, so did Ben. Central Bankers who fumble a bit do not cause Great Depressions. look at the minimum redundancy equation for prices and quantity. What happens when, over night, all the transactions costs are dramatically lowered for nationally agglomerated companies.  The new networks lowered sales costs, for national companies, almost to zero relative to local retailers.

What happens when financing costs drop?

The retailer uses debt to cover inventory. He wants the size of his debt and the price debt, at the sales frequency, to vary about the same as the price of his shoe purchases and the size of the purchases. He does not want either of them to queue up; that is, his store inventory and his bank account should vary about the same.  P1Log(P1) = P2Log(P2), within about one. He will lower prices on his shoe sales, especially if he is under pressure from the nationally syndicated department store. A banker in 1930, who still had the sign correct, would have intended this to happen.