Remedies and Preventives of Panic 2§1 
the advice, influence and even discipline of the Cen- 
tral Reserve Banks than at present. So instead of 
proceeding, as some have hastily suggested, with 
drastic legislation to put brokers’ loans even further 
outside the pale. and attempting to solve the prob- 
lem by law and strong-arm methods, it would be far 
better to let the bankers and brokers solve the ques- 
tion out of court, so to speak, by such conferences as 
President Hoover has organized in the past. 
Ad New Method of Financing Security 
Purchases 
A yet more comprehensive proposal would pro- 
vide a substitute for brokers’ loans. This may be 
considered by those who have faith that the panic of 
1929 may occasion a thoroughgoing change in the 
stock market. 
These argue that the panic of 1907 was caused by 
a shortage of money due to our inadequate banking 
system, and has therefore come to be known as a 
money panic. In order that such a panic might not 
come again the Federal Reserve System was started, 
and it has proved its worth during subsequent crises. 
Also, the panic of 1920 and 1921 was due largely to 
inflated inventories and speculation by manufacturers 
and merchants in raw materials and finished goods 
— primarily because of inflation of credits. This led 
to the “ear-marking” of surplus gold that would 
otherwise work for inflation, and to hand-to-mouth 
buying and rigid inventory control—methods that