188 The Stock Market Crash—And After 
profit, due to a sort of bogus accounting in terms of 
a varying dollar. 
For when this depositor came to spend his $300 
in 1920, he found prices nearly four times as high 
as they had been in 1896. Hence, his entire accu- 
mulation of $300 would buy only about three-quar- 
ters as much as his original $100 would buy in 1896. 
Federal Reserve Control of Price Level 
It was doubtless partly to avoid these upward and 
downward fluctuations in the value of the purchasing 
power of the dollar that the Federal Reserve Board 
has tried to influence the expansion and contraction 
of the currency on behalf of the nation’s business. 
Thus in 1922, when the war and efforts at recon- 
struction had occasioned the flow to America of huge 
gold reserves that threatened inflation, officials of 
the Federal Reserve Board realized that all possible 
steps should be taken to prevent it. Had they not 
taken such action, but encouraged the banks to con- 
tinue to follow blindly the profit motive, they would 
have loaned and reloaned their gold reserves until 
the credit structure had been doubled. Then the 
reserve ratio, instead of being, as it was in the fall 
of 1929, about 70 per cent, would, under the profit 
motive, have sunk more nearly to the legal ratios— 
35 per cent for deposit liabilities and 40 per cent 
for Federal Reserve notes. 
This doubled credit structure would probably have 
led to a doubled price level. There would have been 
consequent inflation quite comparable to the inflation