The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1921-11-05
SOUND BANKING
MAIN CHECK TO
BUSINESS CYCLE
Financiers in Position t,
Foresee and Soften
Fluctuations.
MUST AVOID WASTE
Princeton Economist Tells of
Means for Combating
Depressions.
MUST AVOID WASTE
n, EDWIN WALTER HEsMERER.

ny EDWIN WALTER HEMMERER.
Professor of Economics and Finance
~ In Princeton University.
That there exists In the United
States and other advanced countries
pronounced eyclieal movements in
business with normal periodicity
OF three or four years Is q PROPOSE
ton supported By such an abund-
anes of evidence a. to be accepted
By most students of finance Some
OF this evidence has been given In
the preceding articles of this series.
The general character Of the cycle
has been tsrsely defined By Wesley
c. Mitchell In his valuable book on
Business Cycles as q process of
cumulative change by which .
revival of activity develops into in
tense prosperity, BY which this pros
perity engenders . crisis. BY which
which depression, after growing
more severe for . time, finally leads
to such . revival OF activity a. that
with which the cycle began"
There IN no class In the commun-
ity more vitality affected by the bus
mess cycle than the bankers; there
10 probably no other class In such .
favorable position az they to con-
tribute towards the reduction OF
the evils OF the cycle
These evils are serious The bust
ness cycle II in fact essentially bad.
1t 10 an expression OF alternating
nerves and depression on the
part Of the body economic which
would function more efficiently and
more comfortably II II could main
tain its eomposure- Both the banks
and the business public would be
better on. for example. with stable
interest rates than with alternst-
ingly rising and falling ones. rea-
sonably stable security prices would
be better for the banker and the
public-although perhaps not for
the broker or the speculator-than
prices alternately rising TO alb
normal heights and then falling TO
abnormal depths; the laboring man.
the business man, and the banker
would be much better OF IL labor
were continually employed at prac-
tically full time on normal wages
than they are with alternating
normally high wages with their
accomplishments Of labor inefici-
ency and ealth-destroying over
time, on the one hand. and, on the
other hand. with periods Of unem-
ployment. low wages. idle capital,
and all their accompanying hard
ships. The committee on waste ap-
pointed last January by Herbert
Hoover as president Of the FEEDER
ated American Engineering Socie-
ties In It's recently published pre-.
liminary report says: The largest
area Of waste lies IN the periods of
slack production and unemployment,
due to the ebb and flow Of economic
tides between booms and slumps."
what Can Bankers Dot
Even IL we could realize the
Utopia Of eliminating all the ups
and downs Of the business cycle we
would still be experiencing all the
changes incident to q progressive
economic order, and business would
Still be subject to enough uncertain
ty to try the mettle Of our best bust
ness brains The curve Of business
progress Except In times of war,
Of pronounced failures In crpps, ana
the iike) would be continually ad-
vancinR-now rapidly, now slowly
but practically always advancing,
and We would be through with the
roller coaster" process of reaching
new heights only by . series Of
nsrvs-straining rises and falls.
As . practical proposition can
anything be done by the bankers to
hatten out somewhat this business
cycle curve? The answer, believe,
is: Yes, considerable can be done,
and the results will be cumulative,
but the accomplishments at the be-
ginning will at best be small"
what should be the line Of actionf
II may be summed up in two words,
knowledge and discountinE.
The business cycle thrives on I'M
certainty. The better II 10 under
stood and the more widely diffussd
In the knowledge concerning Il, thu
less harmful will IL be- II bankers
and BUSINESS men should come to
understand the pronounced charac-
ter of the cyclical movement Of the
last three decades As they have been
ably described by various economic
writer's, IL they should do their part
toward collecting data and in other
ways improving our knowledge OF
the business cycle, and should keep
themselves reasonably we'll posted