24: The Consequences of the Cheap Money Policy in the United States Down to the Summer of 1927
Chapter 24
The Consequences of the Cheap Money Policy in the United States Down to the Summer of 1927
Eleven and a Half Billion Dollars Unneeded Expansion of Bank Credit in Five Years. Bank credit expansion had moved far in the United States between June 30, 1922, and June 30, 1927.
25: The Conference of Governors and the Intensification of Cheap Money, 1927
Chapter 25
The Conference of Governors and the Intensification of Cheap Money, 1927
We have now reviewed the main elements needed to understand the problems which faced the conference of central bank governors in New York in the summer of 1927. We have seen how England had become overexpanded, with a great increase in her quick foreign liabilities, particularly those held by the Bank of France.
26: The Stock Market Boom, 1927-1929
Chapter 26
The Stock Market Boom, 1927-1929
Summary of Stock Prices, 1922-1927. Stock prices had responded sharply to the Government security purchases of the Federal Reserve banks in 1922. The level had risen rapidly. With the reversal of Federal Reserve policy in 1923 we had a reactionary year in stock prices. The cheap money policy of 1924 was followed by a further very marked rise in stock prices which carried on through 1925.
27: Mob Mind in 1928-1929
Chapter 27
Mob Mind in 1928-1929
One able Jewish investment banker said in the summer of 1928 that he did not understand what was going on. He said, “When I do not understand, I do nothing.” He had withdrawn from the market. He had turned his holdings into cash, and he was waiting until he understood.
28: The Effect on Europe of Tight Money in the United States in 1929
Chapter 28
The Effect on Europe of Tight Money in the United States in 1929
New York Speculation Participated in by World in 1929. By 1929 the extravagances of the New York stock market had become the central interest, not only for the whole country, but also for the whole world. In May of 1929 a single Viennese bank was sending orders for $250,000 worth of New York stocks to be purchased for the account of its customers in one day, and this kind of thing had been going on for some time in Vienna.
29: The “New Era,” and the Precautions of the Commercial Banks in New York
Chapter 29
The “New Era,” and the Precautions of the Commercial Banks in New York
The New York Times stock market average for twenty-five rails and twenty-five industrials reached a low of 58.35 on June 21, 1921, and the closing price for 1921 was 68.50. For 1923 the closing price was 84.15. With the great upswing created by the cheap money policy of 1924, this rose to 106.92 by the year end 1924, to 137.46 by the year end 1925, and to 139.53 by the year end 1926.
30: The Stock Market Crash of 1929
Chapter 30
The Stock Market Crash of 1929
The stock market prices of September, 1929, and, for that matter, long before September, had reached levels so fantastic that a disastrous break was merely a question of time. Any one of a multitude of circumstances could have started the break, and the break, once clearly started, was certain to go very far.
31: The New Deal in 1929-1930
Chapter 31
The New Deal in 1929-1930
Change of Tariff and Federal Reserve Policies Clearly Called For. The stock market crash demonstrated that fundamentally wrong policies had been pursued. It was surely time for a slowing down and a change of policy. The evidence was particularly clear (a) that the policy of cheap money and rapid expansion of credit was a fallacious one, and (b) that high tariffs interfering with the movement of goods and preventing our European debtors from paying their debts with goods was a fallacious policy.
32: Late 1930—Hitler Gains; Bank of United States Crashes
Chapter 32
Late 1930—Hitler Gains; Bank of United States Crashes
The second half of 1930 saw the shadows deepening. Interest rates continued to decline under the influence of Federal Reserve policy. The open market commercial paper rate dropped to 3% in the third quarter, and below 3% in the fourth quarter. The rate on bankers’ acceptances went under 2% in the third quarter and declined further at the year end, while the New York Federal Reserve Bank discount rate dropped to 2% as the year end came. But the cheap money magic was over.
33: The Tragic Year—1931
Chapter 33
The Tragic Year—1931
Climax of Unsound Tendencies. The year 1931 brought to a climax all the unsound tendencies which we have described in preceding chapters. The carelessly created and very excessive fabric of international debt was tested, and debtor countries found themselves with too great an excess of quick liabilities over their quick assets.
