Which government agency kept interest rates low and the ready flow of cash aided specualtion throughout the 1920s ?

Asked on by cenicienta

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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I believe that the agency that you are asking about is the Federal Reserve system.  A major role of the Federal Reserve (commonly known today as "the Fed") is to control the supply of money in the economy.  One way the Fed does this is by trying to manipulate interest rates.

The Fed sets the interest rate at which it loans money to banks.  If it wants there to be less money in the economy, it raises interest rates.  There are many who think that they Fed should have done this in the 1920s.  They say that the Fed kept interest rates too low, which led banks to borrow more money.  The banks then lent that money to people who used it to speculate in the stock market, driving the bubble in stock prices.

So, the agency that you are asking about is the Federal Reserve.

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