The Fed's Stunning Admission Of What Happens Next
Following an epic stock rout to start the year, one which has wiped out trillions in market capitalization, it has rapidly become a consensus view (even by staunch Fed supporters such as the Nikkei Times) that the Fed committed a gross policy mistake by hiking rates on December 16, so much so that this week none other than former Fed president Kocherlakota openly mocked the Fed's credibility when he pointed out the near record plunge in forward breakevens suggesting the market has called the Fed's bluff on rising inflation.
All of this happened before JPM cut its Q4 GDP estimate from 1.0% to 0.1% in the quarter in which Yellen hiked.
To be sure, the dramatic reaction and outcome following the Fed's "error" rate hike was predicted on this website on many occasions, most recently two weeks prior to the rate hike in "This Is What Happened The Last Time The Fed Hiked While The U.S. Was In Recession" when we demonstrated what would happen once the Fed unleashed the "Ghost of 1937."
As we pointed out in early December, conveniently we have a great historical primer of what happened the last time the Fed hiked at a time when it misread the US economy, which was also at or below stall speed, and the Fed incorrectly assumed it was growing.
We are talking of course, about the infamous RRR-hike of 1936-1937, which took place smack in the middle of the Great Recession.
Here is what happened then, as we described previously in June.
[No episode is more comparable to what is about to happen] than what happened in the US in 1937, smack in the middle of the Great Depression. This is the only time in US history which is analogous to what the Fed will attempt to do, and not only because short rates collapsed to zero between 1929-36 but because the Fed’s balance sheet jumped from 5% to 20% of GDP to offset the Great Depression.
Just like now.
Follows a detailed narrative of precisely what happened from a recent Bridgewater note:
The first tightening in August 1936 did not hurt stock prices or the economy, as is typical.
The tightening of monetary policy was intensified by currency devaluations by France and Switzerland, which chose not to move in lock-step with the US tightening. The demand for dollars increased. By late 1936, the President and other policy makers became increasingly concerned by gold inflows (which allowed faster money and credit growth).
The economy remained strong going into early 1937. The stock market was still rising, industrial production remained strong, and inflation had ticked up to around 5%. The second tightening came in March of 1937 and the third one came in May. While neither the Fed nor the Treasury anticipated that the increase in required reserves combined with the sterilization program would push rates higher, the tighter money and reduced liquidity led to a sell-off in bonds, a rise in the short rate, and a sell-off in stocks. Following the second increase in reserves in March 1937, both the short-term rate and the bond yield spiked.
Stocks also fell that month nearly 10%. They bottomed a year later, in March of 1938, declining more than 50%!
Or, as Bank of America summarizes it: "The Fed exit strategy completely failed as the money supply immediately contracted; Fed tightening in H1’37 was followed in H2’37 by a severe recession and a 49% collapse in the Dow Jones."
* * *
As it turns out, however, the Fed did not even have to read this blog, or Bank of America, or even Bridgewater, to know the result of its rate hike. All it had to do was to read... the Fed.
But first, as J Pierpont Morgan reminds us, it was Charles Kindleberger's "The World in Depression" which summarized succinctly just how 2015/2016 is a carbon copy of the 1936/1937 period. In explaining how and why both the markets and the economy imploded so spectacularly after the Fed's decision to tighten in 1936, Kindleberger says:
"For a considerable time there was no understanding of what had happened. Then it became clear. The spurt in activity from October 1936 had been dominated by inventory accumulation. This was especially the case in automobiles, where, because of fears of strikes, supplies of new cars had been built up. It was the same in steel and textiles - two other industries with strong CIO unions."
If all off this sounds oddly familiar, here's the reason why: as we showed just last week, while inventories remain at record levels, wholesale sales are crashing, and the result is that the nominal spread between inventories and sales is all time high.
The inventory liquidation cycle was previewed all the way back in June in "The Coming US Recession Charted" long before it bacame "conventional wisdom."
Kindleberger continues:
When it became evident after the spring of of 1937 that commodity prices were not going to continue upward, the basis for the inventory accumulation was undermined, and first in textiles, then in steel, the reverse procees took place.
Oil anyone?
And then this: "The steepest economic descent in the history of the United States, which lost half the ground gained for many indexes since 1932, proved that the economic recovery in the United States had been built on an illusion."
Which, of course, is what we have been saying since day 1, and which even such finance legends as Bill Gross now openly admit when they say that the zero-percent interest rates and quantitative easing created leverage that fueled a wealth effect and propped up markets in a way that now seems unsustainable, adding that "the wealth effect is created by leverage based on QE’s and 0% rates."
And not just Bill Gross. The Fed itself.
Yes, it was the Fed itself who, in its Federal Reserve Bulletin from June 1938 as transcribed in the 8th Annual General Meeting of the Bank of International Settlements, uttered the following prophetic words:
The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending. 1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling.
If only the Fed had listened to, well, the Fed.
What happened next? The chart below shows the stock market reaction in 1937 to the Fed's attempt to tighten smack in the middle pf the Great Depression.
If the Fed was right, the far more prophetic 1937 Fed that is not the current wealth effect-pandering iteration, then the market is about to see half its value wiped out.
h/t @pierpont_morgan
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Imagine a world without the 'Putinator' !! He is the only world leader who cares if you live or die !
Just bury your head in the sand and watch some *N*o *F*ucking *L*ife.
But it is different this time. Its going to be worse. The Bolsheviks have gone global and illegal immigration will make the finding the bottom twice as violent.
Once again it's the "illegals!"
I sure wouldn't want to be one you guys' dogs.
Reality time:
http://econimica.blogspot.com/2016/01/sources-of-growth-examined-and-fou...
And what are you suggesting be done given that reality?
Seer- you make a mistake by looking at "global" population and growth figures. My point and I believe Bazza's is... that Trump is going to manage the "system" so that the US has a system. Today there is only a "system" in theory and not in practice. That is what is reverberating amongst the US public.
Your protestations are only a function of what exists now.... well since the repeal of Glass Steagal. They are to be reversed, or more accurately exposed and managed.
Indeed your points which amount to "US protectionism" contain some valid observations. However ... the situation simply cannot continue on the path they are on. The forst step has to be to establish the enforcement of illegal immigration laws. Otherwise all the sociio -economic assumptions one makes about living in a "country" like the US... are not valide assumptions. People viscerally know this now. Therefore the popularity of Trump.
Trump cannot magically reverse the rot, began by the Robert Runbins and larry Summers of the world, and then extended under the presage of electing a "uniting" black President. Obama has been an unmitigated disaster, only protected by a Boolshevik media and Fed Reserve (not to mention the immoral criminals running the Banks). However one has to stop the rot before adjusting to somehting more closely inclined toward reality.
Agreed "protectionsim" is never the answer, BUT one has to have a solid, credible foundation of "country" where the laws are (see illegal immigration for a start) to encourage socio-economic "Trust" in the US as a country. Without this it becoems chaos...whcih we have today, and will have exoponentially in the coming 2 years.
Its free trade... but with a better deal for the US. Makes more sense than any other candidate. Implementation will be the key. Its the best bet of some bad choices. Get on board or be crushed.
"Once again it's the 'illegals!'
"I sure wouldn't want to be one you guys' dogs.
"Reality time:
"http://econimica.blogspot.com/2016/01/sources-of-growth-examined-and-fou..."
You could use a dose of reality yourself.
There is no statistical evidence whatsoever that immigration is good for the US economy. From 1967 through 2013, the correlation coefficient between immigration growth and economic growth was .04 (i.e., no correlation). There was actually a weak negative correlation (-.33) between immigration growth and (real) median household income over the same time period, which indicates immigration is not good for American families. Not only that, but despite the bogus paper put out by the National Bureau of Economic Research (that used a cherry picked time period and area scope) that's trumpeted by the open borders propagandists as showing that immigration produces jobs, each immigrant actually costs American workers at least 1/5 of a job.
Aside from being a bad economic deal for Americans, there are a whole host of other problems associated with importing 3rd world hordes. They are associated with higher crime rates and higher rates of welfare usage. Polls show they favor and are more likely to vote for the kind of leftoid government policies that have turned places like California into a bankrupt, high tax, high cost of living, anti-business, dysfunctional shithole. Not only that, but immigrants are more likely to support government attempts to disarm Americans.
Then, there are the slew of studies which prove diversity undermines social cohesion: https://heartiste.wordpress.com/2016/01/07/diversity-proximity-war-the-r...
Demographics is destiny. History certainly demonstrates that. If you want the US to end up resembling Mexico or Brazil, then by all means we should continue with the open borders, let the world in policies.
As it all falls apart, a huge boost for Trump's campaign. He will come into office with an economy that everyone sees is in ruins, which will give him enormous power to act. Because it will be so plainly disastrous, the electorate will give him some time to turn things around but he'll know he has to have the real economy clearly on the mend within 4 years so he won't fool around.
His focus will be on restoring the real American economy, which will include blocking illegals and even most legal immigrants (goodbye H-1B), slashing imports until the US has balanced trade. That's going to have a big impact on Mexico, China and much of the rest of the world who are going to have to sort out their economies themselves and not rely on exporting to the US.
That in turn will provoke savage political changes in some of those countries.
He'll also be ruthless with those parts of the US government that are overtly harmful to the economy, such as the EPA.
And he just might decide to use the DOJ to put some real criminals in jail.
The timing of the collapse is looking good.
Party Pussy much?
And how is Trump going to magically erase the trillions in debt? And while also increasing growth? Keep in mind that real wealth creation only happens via exports (it's that trade balance thing, which you correctly acknowledge). Who the fuck is going to be buying? Look around the globe. The US is going to out compete China and Korea? With what? Again, how are those poor saps outside the US going to afford what is surely going to be more than peanut exports?
One could just as easily state that Sanders could be swept in due to the same shitty conditions. So, it's not that Trump somehow has a market on this magic square. NOTE: I believe neither can or will make a bit of fucking difference (it's been like this for decades and reality provides ZERO means for returning us to our glory days of unicorns and Skittles).
Read just a moment ago that we are going to pay Iran 1.7 billion! All of it goes back to 79' when the embassy was stormed.
Another win for Obama and Kerry. Cankles got left out of this one.
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending."
They could have just said it is possible to have a crisis when prices are flat. Jesus, they love to complicate things.
Massive QE is in the pipe. They have to weaken the dollar as deflation is ramping up. This seems like the likely scenario but stranger things have happened.
I tend to agree. But I don't think that it has to be all that dramatic given that every other nation is devaluing. The Fed/US can just dump a bit here and there, enough to keep things running as we all play the game of seeing who can hold on the longest.
To me the negative interest rate thing is just too much "in your face" to happen: how others have managed to do this is curious, but Europeans are hard to understand (and it might be that they had little choice in face of the Fed's upper hand). If more direct QE then one has to wonder whether it'll be pushed out until the next POTUS: it would work really well for a direct QE drop on the people should Sanders land in the throne; of course, I'm NOT advocating this, just stating what I believe to be logical outcomes; what Trump would do is a complete mystery, which, in itself, is a bit scary (and I don't think that TPTB really want do be working with someone that has no real marketable strategy/plan).
Seer- again you make huge mistakes with your reasoning. Another QE drop will drive people in gold ansd silver. No growth scenario when people "hoard " the product of their work / value. QE will never work again. Too many people (in US and abroad... see China and Japan) know that iot is desperation.
Trump's tax rate cut plan has the best chance to stimulate the economy. Yes... what about the huge $19T Fed debt? Good question. Slashing of Gov't jobs and spending is in the cards for a Trump admin. This alone will cause the RINO and Boslhevik establsihment to freak out.
Tax rate cuts are the only answer worth pursuing. Gov funded highway and bridge projects ...that are well managed ... will be pursuded as well. The money on the US budget has always been there. It has been the complete mismangement of these funds.... see thr $ 5 B Obama care website... for a prime example of this... now multiply that by 100 times.
I don't think that Trump's policies are a complete mystery at all. They are a direct hit on the Beltway/ MIC, Big Media Bolshevik complex...which is why they all describe Trump's policies as "mystery".
No other candidate has been as clear as Trump with policies. Of course the RINO an Bolshevik refrain is... "HOW are you going to implement those policies". They want very granular details to see how thery can either corrupt the ideas or position themselves to be beneficiaries of the cash flows.
In 1936 the very good folk of the time didnt have a toshiba satellite lap top, and a functioning internet connection, and with that, the ability to find owt, owt about owt.
Now they do. You really shouldnt have put banking on the web you child raping cunts. You know 'Carma'?
It always, as Dog is my witness, comes right back at you.
Cunts
;-)
"It always, as Dog is my witness, comes right back at you."
It's like what goes up must come down. A parabolic function, which, is precisely what's in control of EVERYTHING. Growth expanded and is now stopping and coming back to earth. The banksters didn't invent the parabolic function, nor did they light the fuse (one could argue it was lit when given the instruction to "Go forth and multiply").
Either learn to run faster than the rats or know a different path. You can't kill zombie rats, so only thing one can do is look to avoid them!
My dog, however, will be watching out for both rats AND banksters:
https://www.dropbox.com/s/pl37i2kskiio0qw/P1090015.JPG?dl=0
These words from the Fed represent the saddest possible interpretation of economics - a black hole of understanding at the Fed.
Why on Earth would the Fed think that they can prevent a Depression in America? What could possibly lead them to think they can control an event like this? It's like a man with a shovel saying that he can dig holes - and this will prevent volcanoes.
Why? Because they had to first save the Banks... then have them continue to make their Billions to get outof the wat from the coming maelstrom. This is not a secret.
Their whole plan is to crash the whole system and go digital.
"Following an epic stock rout to start the year, one which has wiped out trillions in market capitalization, it has rapidly become a consensus view (even by staunch Fed supporters such as the Nikkei Times) that the Fed committed a gross policy mistake by hiking rates on December 16"
QE was the gross policy mistake. The stock market rout was priced in before the FED raised a quarter point. The stock market tripled based on a monetary special effect, not on anything real.
Without a rate hike, the economy was already heading into a recession. That shows how bad things really are. The rate hike didn't cause the rout. Reality caused the rout.
A fool's paradise isn't made to last.
So is gold going to go up or down? And when?
Gold is going up when confidence is lost in the US dollar. Right now, the Us dollar is the lesser of the other three other evils, so gold is not going to do much for awhile.
Jim Rogers is waiting for it to go below $1000..... if we're at the head of deflation, it could go a lot lower. Some think $700.
On the other hand Trader Vic Sperandeo says just get some (and silver) - at any price, it doesn't matter. That makes sense because it preserves its value: it'll go down in deflation, up in inflation.
The Fed’s big mistake was not raising rates, but keeping rates so low for so long. This encouraged speculation and malinvestment and actually was a deflationary force since it encouraged overproduction and did not allow the business cycle to self-correct for the excesses on its own. All of these people who think the Fed made a mistake in raising and signaling higher rates are crazy. If they lower rates hear, the market will get crushed. QE after the initial carnage was stopped prevented the market from a true cleansing in 2009. Now the over indebtedness in all areas: stock buybacks, oil, autos, etc. will come home to roost. The economy could have recovered in a normal fashion if the market had been allowed to clear the last time, but n ow the clearing will be even more painful since the Fed by its own admission brought everything forward to today in its myopic approach to “everything is awesome,” meme. They should raise rates, and keep raising rates until people start saving. At some point investment will come back, not through the manipulated Fed or HFTs, but true investors.
ben - "QE after the initial carnage was stopped prevented the market from a true cleansing in 2009." True... but lets address what initally caused the "inital carnage". That is the only way to stop the rot and then see how to manage socio-economic environment best.
The "intial carnage" was the repeal of Glass Steagal in 1999. Just look at the Banks profit from... increased leverage ... increased influence over the ratings companies, Big Media's elevation to "hero" of all the immoral DBags (see Cramer as a simple example) of all expousing the merits of the repeal....etc. The rot only took 8 years for ther system to collapse in 2007/08 !
"If only the Fed had listened to, well, the Fed.
What happened next? The chart below shows the stock market reaction in 1937 to the Fed's attempt to tighten smack in the middle pf the Great Depression."
This is not 1937. There was no sovereign debt bubble in 1937. There is now, however.
Greenspan wrote in the 1960's, that 1920's FED policy lead into the Great Depression. Greenspan didn't listen to himself when he was in charge of the FED. Let's put the horse before the cart. What Greenspan did has us where we are now, not what Yellen is doing now.
That small protrusion in 1936-7 caused the Great Depression? If they had't done that the following years would have shown a return to market rates? Are you desperate to continue the flow of free money to your greedy (and sticky) hands?
Prices not rising?
I just heard commercial shipping rates are going up over 9%. I wonder what that is.
Well, since MOneyBots post could not be "recced", i am reposting below.
Was thinking the same thing myself........since it all began again in 2007.
"The events of 1929 taught us that the absence of any rise in prices did not prove that no crisis was pending.1937 has taught us that an abundant supply of gold and a cheap money policy do not prevent prices from falling."
Those lessons were learned well before 1929 and 1937. Inflation and deflation have always completed a cycle. They always pretend they learned some lesson. The same is going on now.
They always open the barn door, let the horses out, then lament that the horses got out. Well, the horses were let out on purpose, not by accident. They knew exactly what they were doing at the time.
Why did the founding fathers do what they did? Because they knew the lessons in the 1700's.
The same game gets played over and over again, by people who know well what the lessons are and do it anyway, because it is to their advantage.
So let's stop pretending that any lesson is being learned here, because of what happened in 1937 or 1929. Let's stop pretending that some lesson was learned in 1929 or 1937. The lessons were learned in B.C., over 2,000 years ago. The math has never changed.
Exactly correct. The math has never changed. Glass Steagal had prevented the corruption for many years. The removal of the gold standard was the first step in 1972. It did take the never sleeping neo Bolsheviks until 1999 to complete their nefarious and never ending plan.
Right on.
Just how long does a recovery take to happen, 8 years and 10 trilion and a .025 rate hike kills the recovery. You gotta be shittin me. This horse is dead we need to get off of him now.
the more they try to fix it, the more it breaks.... end the fed, let things implode. when the dust settles, we'll be a lot better off if the government would just get out of the way and stay out of the way.
There is nothing complicated about the situation: There is more debt outstanding than can ever be repaid. Much of it will be discharged by default (not be repaid).
Central Banks, including the FED, try to create money to compensate for the money that goes "poof!" in default. This cannot work simply because for every dollar they create, an additional $5 to $70 (depending on leverage) in new debt gets created.
The only question before us now is, "Who is going to take the losses"? Sadly, it will ultimately be every living human on earth. This is how "dark ages" are born. They can last decades or even centuries.
Don't be discouraged - humanity survived previous dark ages. Many suffered and died while a few prospered. Try to be one of the few, though I suspect luck has more to do with it than planning or skill.
Throughout historical crises in the modern world, it was those who knew how to fix things that had the advantage. (Versus academics and white collar professions). Fixing stuff can mean: cars, even just brake service; plumbing, electrical, heating, websites, databases, etc.
Best wishes to the journalists at ZH this week.
https://www.youtube.com/watch?v=rEX1dYyvmig
If this train is going off the cliff, lets get the speed up and go off FLYING HIGH...into the wild blue yonder. Yeeee-ha!
Hang Seng Ind. down 250.45 (1.28%), and falling fast.:
http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_...
Always on Mondays...chinga happens to milk the EVENT all the whole news week, into the next with babylonian babble to mind wash the rational thinking process into knowing only, fear. Easier to steer fear, than truthful love as heard in every one's heart.
And anyways, what the heck are those crazy ziochilds in isreal up to now, but more than that, just what did nutty-yahoo leave in Los Angeles, any ways?
Hummmm...suspicious minds want to know.
And, hey barry soetero, lying evil fake president, when are you going to have your pasties do another false flag event? On Monday? Coming soon and all govt sponsored, as usual? Dad dern, it would be anything but serious, if you evil things were not so programmed and evil, to be exactly as predictable as you are. Evil things working for evil things that do evil things to hurt other people, are just evil and will always do the stupid EVIL thing.
Kinda farked up, eh?
Just watching the purposely planed by the evil hiding in china, rottenchids, rockofellas/etc, shit show crash happen is interesting. Especially when everybody knows soterobama and his cohort isrealli/rothschild puppets are going to do something horribly wicked some day, soon.
On the world scales is awareness (Christ Consciousness) on one side, and on the other side its opponent, ignorance and stupidity teamed up to be evil. All have free will choice, and each path carries with it the just rewards. Be wise, and choose the right-up path. It's just good for your karma, and future lifetimes . DO THE RIGHT THING!
Of course, would it be of any surprise that there are three guys and a robot sitting in some underground room somewhere, all creating the many distractions from literally out of the hat, so the propaganda media can regurgitate the roman barf-a-ramma upon the unsuspecting and terribly addicted, as they gander at the boob-tube night after night, knowing all this ranch-o-ya-ya shit show is just another distraction from say, something huge that could IMPACT THE EARTH, thus changing everything as every one knows it. THAT WOULD KINDA MAKE EVERYTHING KINDA MOOT, EH?
Hummmm....next distraction...please.
It's perfect.
Bernie Sanders is FDR v2.
Without WW2 we wouldn't have had a permanent recovery. So watch also for a major global conflict. Nothing stimulates a nation's economy and resets social conversations like all-out war.
Absolutely not true. The economy went right back into the depression in 1946 and 1947. It wasn't until the war factories were retooled for consumer goods that the economy began to turn around. Even then, it was fueled by people paying in CASH for all of the flashy consumer goods that were rolling off of the assembly lines. And the dow didn't come back to 1929 levels until 1954... 25 years later.
Don't forget that the US had a relatively new industrial base in those days, built in the 1920's and shuttered in the 1930's. Those new factories were opened in 1942 and dusted off to provide war materials. After the war, they went into shutdown for a while until they could be retooled for civilian goods. We do not have an industrial base any longer, because we gifted our manufacturing base to the Far East. This country is $18.8 trillion in debt on the books and at least $100 trillion off the books, so deficit spending is going to be futile. If you think that any new war is going to help this economy, think again. We have been at war for the past 15 years (four times longer than WW2) and we are heading into our third recession.
Wars do not fix economic problems, they make them worse.
I wonder how long it will be until we begin to forcibly treat millenarians for their nihilistic, misanthropic mental illness that masquerades (at least on the Innerwebs) as a "worldview."
There will be some warning before the SHTF:
1. An obvious suspension of civil liberties. Travel - check points everywhere.
2. Full on police state phase 2. Think Catrina but much worse. Cops, Guard patrol, but kill and steal your prep at will.
3. Extreem limitation on money. As bad as you can think, with bank rules changing daily.
4. Lines and more lines everywhere. People want to stock up. Too late.
5. Riots, small at first, then larger with great loss of life.
6. This is a big one. The internet kill switch is thrown. No news other than Baghdad bob BS.
7. Loss of utilities, water and power etc. May go off and on for a few weeks, then dead.
At this time, and any one of these could cause you to activate your plan, you must shelter in place. Plan on having at least 3 months food, water, ammo etc.
And as much as I love ZH, you gotta come up with a battle logo for the hats and shirts. Proudly wore my ZH hat to OR the other day and was asked what the line was in my "Oregon" hat. Something cutting edge, ZH looks good by itself, but add some money symbols and you have a more edgy look. Going to work on it.These games can't go on much longer, the market falls hard sub 14k on the DOW before the close of January!
Trump 2016!!!
All Trump supporters visit: www.ptdradio.com
www.powerthroughdiscipline.com
We may be entering the period where after decades of modern monetary theory the world reverts back to the tried and true. The great reset is a time where the market can fall like a stone or in the case of a "realizing market" slowly grind its way downward. Regardless of how it unfolds the coming adjustment will come and it will most likely be ugly.
Market crashes generally are the result of panic, but so far what we have seen has been more on the level of a minor concern. Only after the market blows through several key support levels and starts making what some people view as crazy new lows that panic will set in, and by that time it will be to late to escape the carnage. The article below titled, "The Great Reset! Has it begun?" explores this subject.
http://brucewilds.blogspot.com/2016/01/the-great-reset-has-it-begun.html
Kinda feels like circa 476 AD ./
Fed played for time for those at the top to secure themselves financially.
All secure then prepared to unleash all that was deferred in 2009.
The fed knew how this would play out all the was money etc. Because precedent was set in 1937. Now if the system had gone into economic turmoil in 2009 it would have sunk the fed and the one bank.
That was the game all along and the length of time protracted for contracts to expire. Now you understand why the likes of GS are out of aluminium etc.
Fed played for time for those at the top to secure themselves financially.
All secure then prepared to unleash all that was deferred in 2009.
The fed knew how this would play out all the was money etc. Because precedent was set in 1937. Now if the system had gone into economic turmoil in 2009 it would have sunk the fed and the one bank.
That was the game all along and the length of time protracted for contracts to expire. Now you understand why the likes of GS are out of aluminium etc.
The idea that lowering interest rates is stimulative regardless of the situation was stupid in the first place. But what is more stupid is the idea that there is a proper way to control hundreds of millions of people's lives through banking.