On Tue, 5 Dec 1995, Steven Horwitz wrote: 
 
> >Anne Mayhew wrote: 
> > 
> >  
> >        So, H went from 7.1 to 8.4, M went from 31.5 to 19, cu (=CU/D) 
went 
> >from .14 to .41, and re (=RE/D) went from .12 to .21. Anne is right. 
>  
> Fair enough.  But let's not forget that from Aug. 29 to Oct. 30, the 
> money supply *did* fall by 5 percent, bringing production and personal 
> income down with it.  Might it not be the case that this "tight" 
> monetary policy and its results are to blame for the ensuing bank panics 
> that led to the fall in velocity and rise in the currency/deposit ratio 
> that Esther points to?   
>  
>   
Let's extend Esther's exam (though not with such elegant questions) and ask 
a)  What assumptions are required to reach the conclusion that it was  
"tight" monetary policy that produced the decline in the money supply? 
 
And, 
 
b) Is it likely that the high rate of bank failures during the 1920s  
(before the autumn of 1929) played a role in the changed ratios of  
currency to deposits and of reserves to deposits? 
 
Anne Mayhew 
1101 McClung Tower 
University of Tennessee 
Knoxville, TN 37996-0411 
PHONE: 423-974-1689; FAX: 423-974-3915; E-MAIL: [log in to unmask]