by Kelsey Williams
GoldSeek
LIQUIDITY PROBLEMS – 1929
In 1928 and 1929, the Fed raised interest rates for the purpose of curbing rampant speculation in stocks. At that time, investors could borrow as much as 90% of the stock price for their proposed investment. The banks were just as aggressive as investors and were happy to oblige.
Raising rates did not slow stock speculation by investors or banks, however.
What it did do was cause a slowdown in economic activity. Thus, as economic activity declined, the stock market continued its rise, unabated.