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spierce

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torontosimpleguy Wrote:
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> Some tough policymakers who didn't want to pump
> money into economy brought America into Great
> Depression. That was a great monetary policy,
> wasn't it?


It's tough to say whether enhanced liquidity would have helped at all. There are multiple reasons for the GD and the most important ones weren't liquidity. I have read a few papers pointing a large finger at the gold standard itself that caused many of the problems.
 
what is everyone's opinion about legislative action to regulate lending practices? i'm not convinced that there is a real need for this... isn't it clear enough that it is not in the best interest of anyone to lend $$ to borrowers that will not be able to pay the loan (laid out quite nicely in TMurf's post)? i agree that there should be better disclosure, but it is almost a moot point if there are not investors willing to fund/provide liquidity and mortgage originators are at risk of going under by doing so... at the same time, i could be wrong... exactly how tight are the lending requirements right now? i know a couple of my friends who recently bought a house (talking within the past 2 weeks) and both were offered both a fixed rate mortgage and an ARM.
 
spierce Wrote:
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> I have read a few papers pointing a
> large finger at the gold standard itself that
> caused many of the problems.

Yes, I agree here. Gold standard was one reason that prevented direct pumping of money into economy. But I guess they could use cheap credits as indirect way of doing virtually the same, which was not done. Actually I'm not an expert in economic history of America, so I can't discuss full details here.
 
torontosimpleguy Wrote:
-------------------------------------------------------
> Some tough policymakers who didn't want to pump
> money into economy brought America into Great
> Depression. That was a great monetary policy,
> wasn't it?

Admitted, the lack of liquidity was a large reason for the GD. But there is something different about a crash and a correction!

As well, Smoot-Hawley was the nail in the coffin to start the depression, and WWII later
 
I have a feeling that demanding more margin on futures contracts might be important for reducing the incentive to leverage up to 20x. After 1929, they demanded 50% margin for stock purchases. Now one can get much better leverage by using futures and options. If there is a regulatory consequence, maybe that will be it.
 
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