On Thu, 2015-08-13 at 06:11 -0800, Lennart Thornros wrote: > deflation in 1929 was because people stopped buying goods, buying > work, to look less indepbted.
No. Deflation in 1929 - 1933 was due to the Federal Reserve's response to a gold run. At the time, the US dollar was still considered to be gold, and the Federal Reserve was charged to ensure that all federal notes could be honored. They raised interest rates in 1929 to such an extent that the money supply which had been expanding for the previous decade, would decline to the point where they could ensure adequate gold reserves. They continued this policy for 3 years until Roosevelt made it illegal to own gold under a WWI emergency wartime act, at which point the gold run was over. However, even after all gold was confiscated, and three years of a contracting money supply, the US dollar still had to be devalued with respect its gold reserves from $20 / ounce to $35 / ounce. The Federal Reserve created a lot of money in the 1920s and much of it went into the stock market, driving prices to extraordinary levels, which had not been seen before that period in time. Craig
