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Originally Posted by hopi watcher  This is the problem when engaging with your comments, you are right and everyone else is struggling to undersatnd. The headings that I give are taken directly from the cirriculum in the UK on the subject. Regarding the 'Pig Iron' workers, the fact remains that the vast majority of US workers were on less than $2000 pa. The fact remains that greed coupled with weak govenrment caused the problem and that is prescisly what occured again on this occasion. |
Sorry if it seemed confusing, but what I'm essentially trying to say is that expansionary monetary policy from the Fed led to bad inenvestments being made in the "real" economy. In other words, capital and labour were misallocated in the boom, which amounts to destruction of real wealth.
It is this expansion of money and credit that causes booms which inevitably require recessions to correct.
I think my statement about the steel-workers' salaries rising, and the stock market boom try to illustrate how the boom affected capital good industries.