QUIZ - Two articles can be found below. Despite the fact they were written 82 years apart, both are hinting at the same economic threat without actually stating it. For questions #1 and #2, cite different parts from each of the articles below that indicate similar treatment of the same economic concepts. That would be two different citations. For question #3 write the "unnamed threat" that both articles fear. In naming this threat remember the key is in the quantity theory of money (you must remember that equation). The consequences of the Federal Reserve Board action were disas- 18A/Tallahassee Democrat . Sunday, October 21, 2007 trous to our economy. It induced unwise investment in European loans and bank advances. Worse still, it stimulated speculation in common FYI Today stocks on American exchanges by making large funds available to National those who wanted to borrow on small margins. The immediate proof ECONOMY was that during 1925 alone loans to stock brokers had increased from Officials $1,160,000,000 to $2,800,000,000, and common stocks had risen 40 per cent. pledge to In November, 1925, it was confirmed to me by Adolph Miller, a member of the Reserve Board, that Strong and his European allies pro- limit credit posed still more "easy money policies," which included continued manipulation of the discount rates and open market operations-more fallout inflation. At once, as Secretary of Commerce, I protested to Daniel Crissinger, Governor of the Board, that such action would further stimulate specu- WASHINGTON - Finance officials from the lation and was not the remedy for Europe's ills anyway. Crissinger was world's top economic a political appointee from Marion, Ohio, utterly devoid of global eco- powers pledged Friday to McMillan Company, New York, 1965 (Third Printing). nomic or banking sense. The other members of the Board, except do all they can to limit damage to the global Adolph Miller, were mediocrities, and Governor Strong was a mental Hoover, President Herbert, The Memoirs of Herbert Hoover. 1929-1941. economy from a jarring annex to Europe. I got nowhere. President Coolidge insisted that the credit crisis as Wall Street took another Board had been set up by Congress as an agency independent of the plunge. "We remained administration, and that we had no right to interfere. committed to doing our I was so alarmed, however, that I took up the matter with members part in sustaining strong global growth," the of the Senate Banking and Currency Committee-the legislative father finance officials said in a of the Board. I hoped to make the Board stop, look, and listen. I espe- joint statement. While saying the functioning of cially interested Senator Irvine Lenroot, who undertook to write to the global financial markets Board asking for information." In one of my memoranda to the Sena- was improving some- tor, upon which he based his correspondence, I said: "The effects of what, they warned that "uneven conditions are these proposed policies upon the United States mean inflation with likely to persist for some inevitable collapse which will bring the greatest calamities upon our time and will require close monitoring." farmers, our workers, and legitimate business."
