236 The Stock Market Crash—dAnd After 
Board’s open market policy, which would have been 
helpful in holding down both customers’ and brokers’ 
loans. 
For several years the country has had surplus gold, 
with potentialities of credit inflation that have been 
restricted by devices of “earmarking” and the policy 
of buying and selling government securities in the 
open market under the auspices of the Federal Re- 
serve Board's Open Market Committee. This has 
been supplemented by business methods restricting 
inventories to actual trade demands. But the policy 
of the Federal Reserve Board during the year pre- 
ceding August, 1929, when the Reserve Bank at New 
York was belatedly permitted to increase the =edis- 
count rate to 6 per cent, encouraged the inflation of 
the stock market with surplus credits. 
While the country was enjoying unparalleled com- 
mercial prosperity and stability, and while the inflated 
stock market credits aided in financing American 
industries, the outcome has proved disastrous to 
American security holders. This might have been 
avoided by a sharp increase in the discount rate dur- 
ing the Fall of 1928 or at any time up to the Spring 
of 1929, with comparatively little consequent hard- 
ship to business. The overissuance of shares during 
August and September would have been prevented, 
and any shortage of credit to business would have 
been largely remedied through an orderly deflation of 
brokers’ loans. The ultimate effect of such an 
aggressive policy would have been a gradual decline 
in the peak of stock prices. The new plateau would