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Will, here is an interesting passage from Robert Patterson's "The Great Boom and Panic" Professor James bell summarized his view of the causative influences in the following way: In the light of historical perspective, ti is now fairly clear that an understanding of the business cycle history of the twenties, and on into the thirties, lies in the causes and nature of the unusually prolonged period of high investment in producers' and consumers' durable goods. In times past excessive investments and consumption had ultimately been checked by credit limitations, but during the 20's a new factor, the federal Reserve system, provided a steady supply of bank credit. Full employment, a high level of income and high propensity to consume, borne of optimism, sustained the demand for goods and a rising tide of speculative fever accounted for enormous fluctuations of new security issues and a boiling stock market. The "New Era" optimism was reflected particularly in the promotion of new enterprises, real estate booms, and in the development of a variety of unsound financial practices in both short and long-term markets. Inflation had taken place more in security values than in commodities and, although a decline in business itself had already appeared in the summer, it was the dramatic break in the stock market in the fall of 1929 which brought on the painful liquidating process and the ...struggle which our banking and business structure was not designed to meet ." Professor Bell gave this speech before the U. S. Senate Committee on Banking and Currency in 1954. Mike |
