Fig. 1. Source: NBER Macrohistory Database
Even more important for the purposes of ABCT, however, is the growth of
funds available for long-term borrowing. Here, the 1920s have some
peculiarities which deserve to be dealt with in some detail.
First, formally, banks in the 1920s did not formally provide long-term
loans to business (and the Federal Reserve did not accept the
loan-related notes with longer maturities for rediscounting), and
instead made six-month loans . However, there is substantial evidence
suggesting that banks in the 1920s increasingly circumvented this formal
restriction by promising to the borrowers in advance to renew the
six-month loans, although there is not enough evidence to establish the
precise scale of such lending. The table below from Calorimis summarizes
the dynamics of formally short-term lending in 1910-29.