Fig. [ ] Total net corporate long-term debt. Source: [Survey of
current business, 1945]
This data seem to corroborate the idea that the credit expansion of 1927
led to an increase in corporate debt in excess of what could have been
expected without it. During the two years prior to 1927, net corporate
long-term debt had been growing much slower than it did in 1927, and
1927 was a year of a slight recession. The key question that arises in
this regard is what the amount of such excess credit was. Since 1927 was
a recessionary year, we have a good reason to believe that without the
credit expansion the increase in long-term credit would have been
significantly below that in 1926 (by $2 bln.). The overall increase in
1927 was by $2,7 bln. We can plausibly estimate that the amount of
excess long-term credit in 1927 was between $1,5 and $2 bln. In
section [ ], we will address the question whether this magnitude
could have been sufficient to cause the investment boom that
[ADD A POINT ABOUT PREFERRED STOCK WHICH IS ESSENTIALLY A FORM OF
LONG-TERM BORROWING. MENTION MASSIVE DIVIDEND PAYMENTS IN 1930]