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STRENGTH OF AMERICAN CAPITALISM

the rediscount rate during the early half of 1929 came, from the fear that such action would in the  first place put a horrible crimp into our "prosperity" by increasing the cost of doing business and secondly would stimulate the drain of money capital from Europe to be lent in our call money market. This latter would on t he one hand stimulate further the insane whirl on the American stock market and on the other hand would increasingly demoralize credit conditions in the principal European states. These were not only fears but realities, for the continued high level of the discount rate was already increasing the cost of doing business by increasing commercial money rates and was draining money capital from Europe. The anomaly of the situation from the point of view of the "normal" functioning of the capitalist economy was summed up in the words "the call rate, not the bank rate, is the king today."3 This was one evidence (we shall come across several others) of the fact that capitalist economy when it functions most "efficiently" by its own standards-profit making-passes imperceptibly into the realm of unequivocal gambling. In the last "bull market" this gambling was to a degree gambling in a "new era" though not the "new era" the scribblers of the bourgeoisie thought it was.

III.


Security issues were flung on the market in monstrous quantities. The following data of the issuance of new corporate securities during the past five years illustrate this spectacularly.

New Capital Refunding Total

1929 $8,649,439,560 $1,386,921,569 $10,036,361,129

1928 6,079,602,416 1,738,274,615 7,817,877,031

1927 5,391,008,544 1,928,187,260 7,319,195,804

1926 4,357,002,750 942,550,970 5,299,553,726

1925 4,100,725,167 637,384,524 4,738,109,691

These increased quantities were floated on the basis of vast quantities of credit made available for stock market use by the banks, by corporation, individuals, and for foreign account in the form of security loans. As a result of the vast quantity of gold heaped in the United States, the banks had available for use a vast volume of credit. The country's commercial
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3. National City Bank Letter, April 1929, p. 56.
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capital engaged in industrial or commercial undertakings; (2) speculative capital reserved for stock exchange transactions and financial operations. Holding to the petty-bourgeois reformist viewpoint natural to him, E. Agahd thinks it is possible, while keeping the capitalist system, to distinguish these two kinds of investments and to do away with the latter." (p.38, Chap. III).