His big error was a failure to take into account the deflationary forces that had begun to sweep the world. After Strong’s death in October and as the Fed initiated its campaign of words against the exuberance of the market, he began slowly to realize that the risk had now shifted “on the side of business depression and a deflation.” But by his own admission, even in early 1929, he still did not comprehend the impact that the scarcity of gold would have on central banks. He had thought that over time they would liberate themselves from the hold of the “barbarous relic.” He completely failed to
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