Page:Bankers and Credit (1924).pdf/184

 psychological suggestion and not by any means of credit contraction, because credit contraction did not happen. And this evidence is all the more important because it is given by a banker who nevertheless believes that the policy of raising rates was right. He admits that "in many directions we were like prophets crying in the wilderness. We could not stop that rage of speculation by any means at our command, at least so it appeared at that time." Nevertheless, "I believed then, and I believe now, that the basis, the fundamental basis of restraint upon speculation rests upon the cost of credit, and that the policy of raising our rates was necessary and justified, and without the adoption of that policy this expansion which took place would have gone to unparalleled levels."

But surely cost of credit can only restrain speculation by making speculators think that if they have to pay so much for credit the game is not worth the candle and consequently closing their commitments and reducing credit by paying off their loans. But this did not happen either here or in America. As long as prices rose, speculators did not want to close their commitments. When prices fell, they could not close them. And we must always remember when we take measures for checking speculators by means of money rates that we run the risk