"The latest report for the S&P Case-Shiller Home Price Indexes showed another small monthly gain in October for the 20-city index, up 0.37 percent on a seasonally adjusted basis or a gain of 0.05 percent when seasonal factors are not taken into account. On a year-over-year basis, prices are now down 7.3 percent and indexes for all 20 cities are shown below."...
The Current Economic Crisis and the Austrian Theory of the Business Cycle
Ebeling, the former president of Foundation for Economic Education, compares the current economic crisis to the Great Depression. He examines the monetary policies leading up to both crises, the thinking of the monetarists and Keynesians, as well as the results of those policies.
Here's an excerpt:
"In late 1928 and early 1929, the Fed became concerned that its expansionary monetary policy was finally threatening a significant rise in the price level. The bank put on the monetary brakes, and in late 1929 and 1930 the stock-market, investment, and real-estate house of cards came tumbling down.
The severity and the duration of what soon became labeled the Great Depression were caused by the interventionist policies of first the Hoover and then the Roosevelt administrations. Rather than allow the market to adjust to the new noninflationary environment- which would have required timely downward adjustments in prices, wages, and shifts in production and employment- the government used various pressures and controls to prevent these changes. The American economy for a long time was caught in 'disequilibrium' relationships between costs and prices, supply and demand, and roduction and consumption- not because of any 'failure of capitalism' but because the heavy hand of government prevented the market from reestablishing 'full employment.'
How similar this is to the events of the last decade! Technological innovations, cost efficiencies, greater output and new goods on the market, along with booming stock prices and real-estate values-all occurring mostly with an annual price inflation of around 1 or 2 percent. But throughout the second half of the 1990s and then again after 2003, the Fed undertook expansionary monetary policies, with the money supply sometimes increasing annually at double-digit rates. Interest rates were pushed to 1 to 2 percent and were even at times negative, when adjusted for price inflation. Money for investment and other purposes was being given away virtually for free. Is it any wonder that financial markets boomed, that standards of creditworthiness for investment and mortgage loans almost disappeared, that real-estate prices went up and up? Both in 2000 and in 2007, when the Fed became concerned that its policy was creating an unstable and unsustainable inflationary environment did it put on the brakes. And both times the Fed-created house of cards came tumbling down.
Every historical episode has its own unique features. History never mechanically repeats itself. But like causes do bring about like effects.The concentration of monetary control in a central bank means that those who manage monetary policy are in effect central planners. Like all forms of central planning, monetary planning is heavy-handed, clumsy, and pervasive in its effects throughout the economy."
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