Policy-makers know that those who forget history are condemned to repeat it. The problem with history, however, is that there is no unanimity among historians in interpreting its lessons.

Drawing conclusions from the past doesn't mean they will always be right conclusions. Take the 1929 stock market crash, which is back in focus following a fall in American stocks over the past two months.Federal Reserve Chairman Alan Greenspan believes that a shortage of liquidity, which followed the stock-market collapse in 1929, caused the Great Depression. He has been determined to avoid this on his watch.

He therefore opened the monetary spigots after a panic hit Wall Street in October 1987, and again in 1998, when falling stock prices around the world threatened a severe credit crunch. Both times he may have saved the world economy.

Now, however, although the NASDAQ composite index has fallen far from its peak on March 10, Greenspan has refused to ride to the rescue of beleaguered investors.

While confidence seeps out of Wall Street, the Fed keeps threatening further rate increases. By sticking to tight monetary policy, the Fed hopes to deflate the stock market and thus avoid a bubble, similar to the one that burst in 1929.

However, contrary to widespread belief, the 1920s were not a period of empty speculation, but a decade of tremendous economic and commercial progress similar to our own.

There was a revolution in communications - the radio, telephone and cinema. There was also a transportation boom, as airplanes compressed distances and motor cars gave individuals the freedom of mobility.

As in the 1990s, the technologies that spearheaded the boom had been invented before. During the 1920s, they were merely perfected, commercialized and mass-produced.

A financial revolution accompanied the technological one, as companies for the first time sought funding directly from the mass-market Everyman, giving him a share of ownership in return.

A remarkably fertile milieu was created for economic growth and technical progress. Yet the economic establishment was slow to recognize the new economy of the day.

Although Yale economist Irving Fisher lauded the technical progress, most other economists of the era railed against the wave of speculation that turned shoeshine men and kitchen help into investors.

This is similar to the 1990s. The Organization for Economic Cooperation and Development, for example, only this year acknowledged the immense contribution of the new economy to economic growth.

Many respected economists still claim the new economy is merely a bubble. Similarities with the 1920s became eerie during the current fall in U.S. stocks.

In 1929, stocks also declined over an extended period, marked by high volatility as sharp declines alternated with short-lived upswings. The choppy market ground down retail investors' conviction that dips were buying opportunities.

When stocks finally plunged on Black Friday, brokers, politicians and the Fed expressed relief. As The New York Times reported over the next few days, they rejoiced that the overextended small speculator would now be shaken out and the true professionals would take over.

Volatile speculative stocks, including such upstarts as RCA, would be replaced by solid blue chips. There was no reason to panic. After all, the real economy was growing strongly.

This should sound familiar. It was nearly verbatim what market analysts said after U.S. stocks suffered a major retreat April 14.

During the rest of 1929 and into 1930, Wall Street stabilized, and prices began to rise. At the end of 1929, just two months after the crash, the Times didn't even name it the event of the year. That honor went to some polar expedition. President Herbert Hoover confidently predicted that economic growth would go on.

But with the fall of the stock market the financial system that underpinned the economic prosperity of the 1920s was suddenly knocked out. Like a beehive that can keep going through the motions for some time after the queen bee has been removed, the economy continued to grow for a few more months. By mid-1930, however, the United States and much of the rest of the world was in a depression.

In the 1920s, the system was undone by excessive leverage. Back then, buying stocks on 80 percent-to-90 percent margin was the norm. Although today's investors are less leveraged, the economy may be more severely exposed to a prolonged stock market stagnation.

The entrepreneurial efflorescence in the United States is closely tied to the success of the NASDAQ market. ''Angel'' investors who finance start-ups, venture capitalists who nurture their growth and employees who work for stock options all keep their eyes on the ultimate prize - a successful initial public offering.

But most scheduled IPOs have been pulled in recent weeks, and anecdotal evidence mounts that financing deals for start-ups are being cancelled or postponed.

The start-up culture, while extremely vibrant, exists on a shoestring. Deprived of investor funds, start-ups could belly up quickly. While interest rate hikes by the Fed have done little to cool off U.S. economic growth, the loss of confidence on Nasdaq might do the trick only too well. Unemployment could spike and consumption could decline in short order.

The stock market may then have another bout of buying frenzy, but it may come too late to save the economy from a deflationary spiral. The fall of U.S. retail sales in April, especially the weakness in men's apparel, the first category to be curbed in bad economic times, may be a sign of trouble as well as an indication of how rapidly it could come.

But since other economic indicators continue to paint a rosy picture, they may deceive economic policy-makers, just as they did in early 1930.