The Four Major Monetary Policy Errors

1. The tighening of the money supply in 1928 helped lead to the crash. This tightening of the money supply took the form of increased interest rates. The logic was that this would help those who needed the credit for productive purposes, and would disuade those who were using the credit for speculation. The Fed at the time had an onging concern with the speculation.

It worked. The Crash of 1929 will show us that the efforts the Fed did in fact pay off. They managed to bring down prices and slow down speculation. The flaw in their "pyrrhic victory" was that they accomplished their goal at extreme cost.

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