Monetary & fiscal stat comparisons, 1929 and now

[bart]

Monetary & fiscal stat comparisons, 1929 and now


Not much to comment on, other than that there are many differences and a few similarities.


http://www.nowandfutures.com/images/depression_comp1.png


http://www.nowandfutures.com/images/depression_comp2.png



http://www.nowandfutures.com/images/depression_comp3.png






And one comparing the Dow 1929-1940 with the period since the 2000 peak.

http://www.nowandfutures.com/images/dow1929_2000.png



From my great depression page.

[bart]

And another one, this time showing one of the few negative differences between now and post 1929 - velocity. Note that the definitions of both base and M1 have changed since 1929, but the comparison seems better than nothing.

http://www.nowandfutures.com/images/depression_comp4.png

[Sapiens]

Bart,

A while back a friend was telling me about velocity, but he was not taking into account transaction costs of electronic “Money”, that is to say, back in the 1930’s cash and checks were the order of the day and the banks didn’t take a cut of the transaction as they do today with credit and debit cards. What’s your take on transaction costs and its effect on Velocity?

-Sapiens

[bart]

Sapiens, I think transaction costs have a minimal effect on velocity primarily since they both don't affect the actual retail price and also since they've become part of the system.

I think that the recent growth in currency in circulation has more of an effect, since it shows probable trends towards savings via cash (.01 % on TBills isn't worth it), a fear factor influence, and of course more potential of hiding things from Uncle like underground economy activities.

[Sapiens]

Thanks Bart.

[bart]

One more chart for the series, this time adding unemployment and both 10 yr Treasuries and BAA bonds.

http://www.nowandfutures.com/images/depression_comp5.png

[bart]

And another comparison chart, this one showing "real" 10 year TBond interest rates - then and now.



http://www.nowandfutures.com/images/depression_comp6.png

[we_are_toast]

May I ask what the "Bank Credit" is actually measuring?

[bart]

May I ask what the "Bank Credit" is actually measuring?

Bank Credit of All Commercial Banks

Part of the data set is at http://research.stlouisfed.org/fred2/series/TOTBKCR

[Finster]

And another comparison chart, this one showing "real" 10 year TBond interest rates - then and now.



http://www.nowandfutures.com/images/depression_comp6.png

A case could be made that the lower ("current") line is even closer to the 'then' line. Recall interest rates are always quoted in prospect, whereas inflation is always quoted in retrospect. Moreover, since we have recently been in a deep deflation, the "inflation" component itself has been negative - that is, even a zero nominal interest rate has been producing a positive real rate. Which also helps explain how real live markets have been able to not only tolerate, but generate such vanishingly low nominal rates - even to the point of some short rates dipping into negative territory.

Now all that remains is to watch and see who among us (HUI, MOI?) might make such a case...

[bart]

And another comparison chart, this one showing "real" 10 year TBond interest rates - then and now.


http://www.nowandfutures.com/images/depression_comp6.png
A case could be made that the lower ("current") line is even closer to the 'then' line. Recall interest rates are always quoted in prospect, whereas inflation is always quoted in retrospect. Moreover, since we have recently been in a deep deflation, the "inflation" component itself has been negative - that is, even a zero nominal interest rate has been producing a positive real rate. Which also helps explain how real live markets have been able to not only tolerate, but generate such vanishingly low nominal rates - even to the point of some short rates dipping into negative territory.

Now all that remains is to watch and see who among us (HUI, MOI?) might make such a case...


I just noticed that Excel or one of my macros had a hiccup and didn't reproduce the full data from the '30s, and regenerated the chart to fix it.

I also took the opportunity to change the current plot to just use CPI, rather than CPI w/o lies, so it now shows an actual positive interest rate as VOUS note & observe. ;)

Very few know or realize how high real (as in CPI corrected) interest rates were in the early '30s, and is one reason why very little borrowing occurred.