ABSTRACT
Admittedly, the official support that had to be granted to a large number of banks and other undertakings constituted a reflationary factor which was independent of the Government's monetary policy. Had the United States remained on a gold basis this factor would not, however, in itself have resulted in an actual rise in prices. Government support to an insolvent bank does not create any additional purchasing power. All that it does is to prevent a wholesale contraction in purchasing power through a bank failure.
