1. The resulting expansion in loan supply relative to loan demand would put downward pressure on rates. In this way, market interest rates, varying directly as they did with the scale of member bank borrowing, supplemented the latter as an indicator of the degree of policy ease or tightness (see Meltzer;Contrariwise, when borrowing was low and banks had repaid their indebtedness, they would be willing to expand their lending,1976
2. By all accounts they were extremely low, suggesting that the Fed had already done all it could do to arrest the depression. It was these indicators that the Fed used to justify its policy of inaction. By contrast, the rival quantity theory indicators --money stock, price level, and real interest rates --were flashing the opposite signal. Thus Lauchlin Currie's pioneering series of the M1 money stock showed;Signals Flashed by the Indicators Early in the Depression Relying on these indicators --member bank borrowing and market interest rates --the Fed judged its policy to be remarkably easy in the initial phase (1929-1931) of the Great Depression,1929