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> I found that the economy went off the rails if you don't react right away Sounds pretty realistic to me!

• mmastrac 4y ago
  Economy as a twitch game gives me heartburn...
• deleted 4y ago
  [deleted]
• anm89 4y ago
  While there were panics and issues before the era of active central banks, most fo the time, things were calm. The idea that the world would burst into flames if central banks weren't there to micro tinker is not historically supported. It is far from a fringe viewpoint in the finance world that central banks have contributed more to volatility than to stability over the last 20 years.
  • pbourke 4y ago
    > While there were panics and issues before the era of active central banks, most fo the time, things were calm. Wow - this is insanely inaccurate. Before the active central bank era (call it post-WW2), recessions lasted up to twice as long as they do during the modern era. Unemployment also peaked at much higher numbers: 25% during the Great Depression, for example. The pre-central bank localized agrarian and early industrial economic model leant itself to boom and bust cycles eg massive instability.
    • Jakawao 4y ago
      > The pre-central bank localized agrarian and early industrial economic model leant itself to boom and bust cycles eg massive instability Glad to see we put those patterns behind us /s
      • bee_rider 4y ago
        I mean, we haven't had a depression quite as world-shatteringly gigantic at the Great Depression since. Although I guess it isn't obvious if that's because the system we have now is somehow better, or if it is just the case that we've been more prosperous as a baseline since then, and so our various downturns haven't launched people into such a level of destitution.
        • jokethrowaway 4y ago
          Or if we've just postponed it all until now
        • barry-cotter 4y ago
          Central banks and macroeconomists have learned a lot since the Great Depression, mostly of the “don’t do that again” variety. For example the Fed caused the Great Depression by contracting the money supply by a third in the middle of a recession, killing US economic growth for decades. They are unlikely to repeat that mistake.
          • notahacker 4y ago
            Yes. This is why they no longer operate on a gold standard, which de facto contracts the money supply (people want to hold "safe" gold rather than circulate money) in the middle of a recession
            • barry-cotter 4y ago
              The Fed did a lot worse than a Gold Standard would have. You can’t blame the gold standard for a decision to contract the money supply.
              • notahacker 4y ago
                They were literally on a gold standard at the time. You absolutely can blame the gold standard for the Fed decision to raise interest rates to protect gold reserves. The only decision the Fed could (and eventually did) take to allow the money supply to expand was removing the US from the gold standard.
    • BirAdam 4y ago
      The Great Depression happened after the US central bank was created in 1913.
      • selectodude 4y ago
        The Fed didn’t have any ability to effect money supply until 1932 when the US went off the gold standard.
        • kolanos 4y ago
          Pretty sure the Federal Reserve was setting reserve requirements from day one, which has a direct effect on the money supply.
        • BirAdam 4y ago
          No, but the Fed did have the ability to extend credit beyond the reserve of gold.
    • anm89 4y ago
      Yeah, these days we only have existential risk to our system via structural contagion twice per decade. Good thing we moved past that era! Those issues were real and went o longer than they needed to but also weren't as deeply structural as the issues today. Our issues are different but not better.
      • pbourke 4y ago
        I don’t know what you would consider “deeply structural,” but not having influence over the money supply seems fairly structural. Going back further, the issues are larger: not having a central bank, not having a single currency, no deposit insurance, etc.
    • barry-cotter 4y ago
      The Great Depression was unprecedented because prior to that no one had had the power to mess up the economy that badly. The Fed was extremely active. They made the Depression Great by contracting the money supply by a third when the economy was in recession. Given the consequences of the Great Depression (WW2) it seems unlikely active central banks have been a net good.
  • Aunche 4y ago
    The world didn't burst into flames because most people were agrarian and largely self sufficient. Part of the reason the Great Depression was so devastating was because the economy was more interdependent than ever before.
    • yywwbbn 4y ago
      That wasn’t true in the 19th century. There weren’t that many self sufficient farmers left back then and the economy was heavily interlinked, especially after the rise of railroads. The economy was in a permanent boom and bust cycle e.g. the Long Depression (or the first Great Depression) lasted close to a quarter of a century.