In this report, I cover the early market action from London on Thursday, May 29th, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I look back at the history of monetary policy in the period preceding the 1929 stock market crash and compare it to the monetary policy of the present day and especially the Federal Reserve's actions.
It's interesting to note that during the Roaring 20s we had a similar accommodative policy that we have had since the Crisis of 2008. I look at the book War and Gold by Kwasi Kwarteng. Mr Kwarteng shows how after a long period of loose credit the Fed raised the discount rate from 3.5% to 6% from 1928 to the summer of 1929 and how that triggered the Crash of 1929 in October.
My conclusion is that much like in the 1920s the present-day Fed has made the same mistake of allowing too loose a monetary policy for too long and that the current Fed chairman, Jay Powell has also raised rates too quickly. It is my opinion that the current credit bubble could be on its last legs and that the consequences could be even worse than what happened during the Great Depression of the 1930s.
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