The Bridgeport times and evening farmer., 1921-12-28
WHY ARE MEN WITHOUT EMPLOYMENT?
.Miscalculation Of Demand Intensifies Upward And Downward Swing Of
 Business.

things have worked themselves out, however, 1t is found that each has produced only half as much again as before. This half as much again is exchanged for the half ns much again produced by the others, that is, on much less favorable terms than had been expected, Consequently, every group is disappointed. Its error of of pessimism, Just as 1t had before demand of the other groups, so now 1t underesttmaAes thom. If some real cause of falling demand, such as bad harvest, comes into play at the same time. the significance of this also tends to be exaggerated, All the groups now sec life blacker than it is. just as before all of them in- agfned an unreal brightness.
 Part Played by Money.
 These outbreaks. and the swings of business activity that are responsible for them would take place under the influences I have been describing even in a world in which money and banking were unknown. In the ac- tual world they are intensified by re-
 fiex price influences, In "good times people turn over their bal ances more often than usual. and also
 enlarge them by borrowing from
 banks. The result is that prices go
 up. Fixed interest payments, how
 ever. do not go up: and wages. though
 they tend ultimately to follow the
 price movements, are apt to lag be-
 hind. This means that business men
 in good times secure a sort of bonus
 at the expense Of people in receipt of
 fixed incomes and, in a less degree, of
 wage earners. This spurs them on
 to further optimism and drives the
 boom higher. On the other hand,
 in 'bad times bank balances are
 turned over less rapidly and reduced
 in amount, with the result that prices
 fall. But fixed interest payments do |
 to fall, again lag behind prices, This
 means that business men are com pelled to pay a sort of tax to people
 In receipt of fixed income and to wage earners. This intensiffes their
 losses. magnifies the dtscoura cement from which they are suffering, and
 causes them to contract their opera
 tions more violently than they would otherwise need to do.
 It is not, however. solely CT even mainly to the war disiocations that the present industrial depression is due In gHeat measure the world collapse is an aftermath in conse- Quence of the world boom that pre- ceded it: It is the downward phase
 cycle. During 1919 and 1920, with
 Governments everywhere continuing to finance themselves by bank credits and paper money, prices moved rapid Iy upwards, and business men found that they could always sell their stuff for much more than it had cost them to make and hold II. Every body perceived the terrible dearth of goods in war-ravaged countries. while many failed to realize that real demand is constituted not by needs only, but by needs combined with power to buy. Intending dealers, therefore, placed orders and made purchases with recl- l less inlprovidence. fTfle banks, since i the export of gold was banned, were
 no longer forced to protect the specie
 reserve by their own prudence and were anxious not to embarrasS the efforts of their Governments to raise
 or renew loans. Consequently, they | delayed to apply to a too exuberant | industry the well-tried brake of | heightened money rates. Masses of
 goods of all sorts were piled up in
 anticipation of high-priced demands, and it seemed that an era of fabulous | prosperity had dawned.
 l Bursting of the Bubble
 | This state of things could not con- l tinue indefinitely. The gains that | rising general prices bring to busi- ness men are obtained by the secret | nQulcting of those persons who de- pend upon fixed money incomes. 1 This source of gain is not inexhaus- | tible; for, If prices rise far enough, | the real value of previously existing l fixed incomes will practically disap- l pear. But over the greater part of | the world this ultimate cure Of an in l f14tionist boom has not been called l into play. The weight of accua1ulat- ing stocks frightened peoples the out