New-York tribune., 1921-12-25
Statistic and
Chart Values
Overestinated
American Exchange Nation
al Bank Takes New View
on Business Cycle"
and Raps s'Mysticism''

Statistics, charts and other methods
Of compiling data on business cycles as
guides to future trends are of little
value, or rather their value has been
overestimated, according to the Amer
lean Exchange National Bank of New
York
"Current discussion of the business
cycle" says the bank in it's current
review of business and financial con-
dltions tends to endow it with a mys-
tlcism not warranted by the facts.
This tendency grows out of the per-
hapS too elaborate methods that have
been devised by those who seek to make
cult OF what is after all a very simple
matter IN making this criticism we
value OF statistics or other data which
are intended to guide business men in
the making of their plans; rightly un-
derstood and applied, these data are of
the utmost value t. business, but in so
far as they are not understood and
when they become complicated they are
likely to result in an excess Of caution
which might do more harm than good
1t is also true that no perfect system
of recording past cycles or of fore
casting the future has yet been de-
vlsed; the best Of the systems are en-
TITLED to claim no more than certain
values as indicators. Furthermore. be-
yond providing a record of past per-
formances and a coditication of ex-
perlence, they have no reliable value
AS forecasters, although it is of course
true, for example, that weighted chart
competently drawn will show the trend
of business and the sweep of the pre-
ceding movement and, under normal
conditions, will provide basis for a
reasonably accurate Judgment Of the
future. But, a rule, the wide awake
business man has sensed or followed
the course Of events we'll beyond any
point the most up-to-the- minute chart
could possibly reveal. However, all
business men are not wide awake, and
it also frequently happens that those
who arc wide awake become so inn
mersed in their immediate interests
that they are apt to overlook the larger
trend of affairs, so there can be no
question Of the valre of competently
compiled and graphic information to
them
The element of mysticism which has
been introduced into the question by
suggestion that business cycles are
caused by sun spots is not new Jew
ons. the economist, made a similar sug-
gestion in the last century and pro
vided the mystics of that day with
basis for speculation from which they
were able to draw ridiculous conclu-
sons Jevons's theory and the sun spot
theory of business cycles are each
founded on practical considerations,
the sun spot theory being based on the
effect of the sun spots on the crops.
AS the sun spots reach their maxinums
once every eioht years or so. and as
the observations of the author OF the
1oI |, 10 -, /
major swings Of the business cycle oc-
cur in similar period, he was induced
to champion the suggestion that the
two movements might be related They
may, and a~ain they may not. but if
they are related the relation is ex-
planned by Very simple theory which
in no way lends itself to a mystical in
terpretation: nor is there any basis for
the even broader mysticism expressed
in the formula, We do not as yet know
why we have business cycles We do
know why we have business cycles
the explanation is as simple as going
up and down stairsthere is no mys-
terry about them. Business cycles toi-
low the ebb and Row OF confidence; as
a rule the move forward from a basis
of low prices ard backward from high
prices. Low prices do not always I'M
medateiy develop confidence, but they
always provide the safest possible
foundation for an advance, and in ad-
vance usually follows them. In d
period of low prices the slightest
stimulus will bring an immediate re-
sponse and result in an advance which
Will Gather force as it goes. In a
period of HIGH prices the slightest dis
tufuance of confidence will precipitate
& decline which win also gather force
a it coes. The factors which stimu-
late or destroy confidence are various
and frequently they intervene without
warning. but a. a general thing the
prudent man who keeps informed is
able to protect himself against the
crash or to participate in the advance
as his knowledge Of underlying condi
tons let's him know when the situation
is dangerous and when 1t is propi-
tious."