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Re: Need an economist on money creation?
I see a strange parallel in the current economic crisis with that of the 1929 depression. I know this sounds absurd, but bear with me and you may perhaps see something practical to consider.
Continuously, since the depression, the government has instituted ways that enabled the money supply and the quantity of debt, public and private, to expand. Then, during the Bush administration, with the huge tax cuts and the equally huge increase in spending (on wars), the inflation-type cycle increased. The price rise started to really accelerate. However, there was the housing bubble of 2005 which was the worst we ever had. It was like the South Sea Bubble a couple centuries ago, the Tulip Craze and the John Law Inflation all in one!
So, let us say that 2005 corresponds to the beginning of 1930 when the Depression began (the Crash came very late in 1929). Consider the bottom of the depression to be the beginning of 1933. That is a decline of 3 years. IF we apply that to the present situation, we would be at the bottom of our current "depression" at about the beginning of 2009. After that, I would expect a very fast recovery.
Here is my reasoning: I think we are experience much the same thing as occurred in The Depression except that it is muted and distorted by the immense growth of printing press and debt money. Only the timing remains the same---3 years down. . .
This is my opinion, my forecast: the stock market has seen its lows and it will rise steadily from here. Meanwhile, economic conditions will grow worse for the next almost six months. Each leg down, however, will bring about more government help to the economy---meaning an accelerating growth in the money supply. So, with residential real estate prices having dropped about one third, the general price level higher, and the economy awash with new cash, debt will also begin to grow again and there will be an unusually fast recovery---unlike the slow recovery from the Great Depression. I expect this will soon turn into hyperinflation. Then, rationing.
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