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by causing inflation, and then raising the discount rate and making 

money dear.

In 1914, Federal Reserve Bank rates had dropped from six percent to 

four percent, had gone to a further low of three percent in 1916, and 

had stayed at that level until 1920. The reason for the low interest rate 

was the necessity for floating the billion dollar Liberty Loans. At the 

beginning of each Liberty Loan Drive, the Federal Reserve Board put a 

hundred million dollars into the New York money market through its 

open market operations, in order to provide a cash impetus for the 

drive. The most important role of the Liberty Bonds was to soak up the 

increase in circulation of the medium of exchange (integer of 

account) brought about by the large amount of currency and credit 

put out during the war. Laborers were paid high wages, and farmers 

received the highest prices for their produce they had ever known. 

These two groups accumulated millions of dollars in cash which they 

did not put into Liberty Bonds. That money was effectively out of the 

hands of the Wall Street group which controlled the money and credit 

of the United States. They wanted it back, and that is why we had the 

Agricultural Depression of 1920-21.

Much of the money was deposited in small country banks in the Middle 

West and West which had refused to have any part of the Federal 

Reserve System, the farmers and ranchers of those regions seeing no 

good reason why they should give a group of international financiers 

control of their money. The main job of the Federal Reserve System was 

to break these small country banks and get back the money which 

had been paid out to the farmers during the war, in effect, ruin them, 

and this it proceeded to do.