Funny how such a smart guy made the very mistake that in 1966 he wrote about, causing him to be the king of bubbles. For the wonks among us, read the whole article - it's very interesting given today's over-speculative, over-credited economic condition.
The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom.
Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom.
But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence.
As a result, the American economy collapsed
Then he writes on the gold standard:
It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
December 27, 2005
Posted by blogger at 12/27/2005