New Low Observer

"nine months of unchecked leverage had piled up." The Fed was aggressively trying to stop stock speculation since Feb 1925 by raising rates. The collapse of Hatry in 🇬🇧 & Frankfurter Allgemaine Versichrungs in 🇩🇪 in Sept 1929 crushed the Fed's efforts.

"nine months of unchecked leverage had piled up." The Fed was aggressively trying to stop stock speculation since Feb 1925 by raising rates. The collapse of Hatry in 🇬🇧 & Frankfurter Allgemaine Versichrungs in 🇩🇪 in Sept 1929 crushed the Fed's efforts.

There is a magical place where both the Dow & Nikkei cannot rise much further. That place is at a six percent discount rate.

On this day in 1929, the Federal Reserve Board in Washington rejected the New York Fed's request to raise the discount rate for the eighth time in three months. NY Fed Governor George Harrison wanted to make borrowed money expensive enough to cool the speculation. Washington refused. Brokers' loans had ballooned past $7 billion. Investors were putting down 10% and borrowing the other 90% at 6%, betting on 30% returns. A rate hike would have destroyed that math overnight. The Board finally gave in during August. New York got its rate increase to 6%. But by then, nine months of unchecked leverage had piled up. The market peaked September 3rd. By the end of October, the Dow was down over 30%. Every month the Fed sat on its hands was another month of leverage building in the system. The 1929 crash had a lot of causes, but the discount rate stalemate was the one regulators had direct control over and chose not to use.

It’s been 3 years since the Fed hiked interest rates and housing hasn’t gotten any more affordable for anyone

🚨 Americans have never been this broke before. Google searches for “can’t pay credit card” just hit an all time high. At the same time, US consumer confidence has collapsed to one of the lowest levels ever recorded. The American consumer is completely running out of money.

Evening walk.

1790-2000: Wholesale Price Cycles The 1947 Dewey and Dakins book Cycles: The Science of Prediction projected an interest rate peak in 1979 (actual 1980) and a trough in 2006 (actual 2008). Next stage in the cycle, up.