The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1921-12-19

DePFeSSaon but lfanSnofy.
business cycles of alternating great pros
ID perity and succeeding great depression, such
as that from which we are now emerging, have
occurred more or less regularly among all nations
it is observed by the Joint Commission on Agri-
cultural Inquiry, which has just made to Congress
the first of four reports Of its investigations.
Various theories. have been advanced as to the
CAUSES OF these cycles. but exhaustion of credit
and capital has been followed by the loss of markets,
foreign, domestic, or both.
Says the report
he cycle runs from the end of period of de-
preston when confidence begins slowly to return when
surplus stocks of goods have been worked off and shelf
stocks are generally reduced when the lowered demand
accompanying Unemployment begins overtake supply,
when money easy interest rates are down. and price.
especially for raw materials are low At this period
business begins to revive; and more people are
employed and more and more goods are consumed
BUSINESS expands at an increasing tempo unemployment
disappears, and wages increase As prices rise fever
OF speculation sets in and there develops veritable
scramble for goods, stocks, and properties Paper
profits are large People spend freely extravagantly
and finally beyond their current income Orders for
present and future deliveries pile up and an apparent
shortage of goods develops sellers market Indus
trial plants extended to meet this supposed demand
interest rates rise and bank loans and currency issues
expand to meet the expansion of business. All the
economic and psychological factors conspre produce
of intense business activity and prosperity
In these periods of great activity and prosperitv
heavy volume of debts is made for plant extensions
tor production, and consumption. These debts accumu-
late faster than production and savings Greater and
greater difficulty is encountered in meeting debts and
interest currently due with production and saw
ings As interest and debts currently due overtake
and pass current production and savings curious re-
versal of direction in the economic and psyche
logical forces and phenomena which combine produce
prosperity. Bankers, whose expanding loans have de-
pleted their forced stop further lending
and then to call loans; banks of issue raise discount
rates; speculation rapidly dminishes manufacturers
and merchants begin to place surplus stocks on the
markets prices begin to fall; consumers curtai pur-
chases and spending in anticipation of still lower prices
orders for goods Cancelled and it becomes apparent
that the orders representing demand less
Of fictitious proportions and more goods put
on the market while demand grows less and less build
ing slows down debts lquidated far possible
from current receipts the buyers strike Develops pro-
duction fails off in consequence of lowered demand
and unemployment develops prices continue to fall and
the decline is usually rapid than the rise.
This process is continued until some portion of
the debts made in the period of prosperity is lquidated
and until stocks are reduced to point where sach
demand exists, even in times of unemployment
finally overtaes supply Prices and interest are
down. wages lower money is easy, and the be-
ginning of the of prosperity is at hand; all
of which we have in this country and in many
others in highly condensed and most spectacular form
in the last two and half years. Rarely has cycle
swept through all its familiar features more swiftly and
dramatically than that which followed the close of the
great war. The most distant nations equally in
voved and most of them followed through the
sye phases in almost identical times Far-distan Java
and Japan were affected in much the way, at
much the same times, as the United States Canada,
and Great Britain"