Speculation and Brokers’ Loans 231

which were then far too low, not having yet been
adjusted to the results of war-inflation. Through
that inflation the dollar had lost a third of its purchasing
 power. But the public had not yet been convinced
 that the change was permanent and were loath
to revalue stocks on the basis of permanently inflated
dividends in terms of dollars.
(3) These two contrasted rates, the abnormally
low interest rates and the abnormally high stock
yields, led to borrowings at 3 or 4 per cent to buy
stocks yielding 7 or 8 per cent, thus initiating the bull
movement.
(4) The withdrawal of gold to Europe in 1927,
consequent on the resumption there of the gold standard
 and the later withdrawal of American bank funds
from the stock market, failed to stop the movement
because, by this time, corporations had acquired so
prosperous a cash position as to supply the brokers’
loans themselves.
(5) The net result was a rise in interest rates
which reattracted gold from Europe and led to European
 central banks raising their rates.
(6) This may have helped precipitate the crash
in London, and the drop on the Paris and Berlin
Exchanges, which in turn, reénforced the growing
 bearish pressure on the New York Stock
Exchange.

New York Banks Lend Aid
During the market crisis the Reserve Bank at New
York released credit to the member banks, which