Most governors feared that “artificial” attempts to stimulate the economy by injecting liquidity into the banking system would not jump-start business activity, but just touch off another bout of speculation. Too much cheap credit had created the original bubble in the first place. Now that it had been pricked and stock prices were falling to more reasonable levels, why short-circuit the process, they asked, by making credit too cheap once again. As one argued, further easing would only result in a replay of the “1927 experiment, now quite generally . . . admitted to have been disastrous.” The
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