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 Reserve
 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 preceding
 August, 1929, when the Reserve Bank at New
York was belatedly permitted to increase the =ediscount
 rate to 6 per cent, encouraged the inflation of
the stock market with surplus credits.
While the country was enjoying unparalleled commercial
 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 during
 the Fall of 1928 or at any time up to the Spring
of 1929, with comparatively little consequent hardship
 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