Evening star., 1925-12-26
FACTORS IN TRADE
NEED CLOSE STUDY
Babson Says Prosperity Is
Never Permanent-Hard
to Detect Swings.
BY ROGER W. BtBSON.

WELLESLEY HILLS, Mass. Dc
cCmher 2h.-We are now in prosperous
times Retail business during this
christmas season was one of the
largest for many years. Believing
that in times of prosperity we should
prepare for depression. ! am this
week touching upon very unpopu.
lar subject. namely. the possibility of
future depreSSionS and the conditions
in our economic and industrial life
which. if not checked can turn the
tide of prosperity. \ dangerous no
tiGn is getting root in the minds of
many business men and investors that
the days of paniCs and business de
preSSionS are gone forever.
This idea is not only mistaken. hut
it is likely TO get many people into
trouble Apparently such confidence
is based on the machinery which has
been set MP To guard against iniia-
tion and credit abuses. Chief amonE
such preventive measures are the
Federal Reserve System and various
statistical reports. including those
from retailers Wholesalers and mann
facturerS. regarding stocks Of goods
which they have on hand. These
safeguards are good a$ far as they
80. but unfortunately they were de
signed only t. meet tho conditions
which existed fiNC Years ur more ago.
Neloped and npen up new possibilities
of danger that arc not covered.
Former Safeguards DO Not Apply.
It is necessary. of course. Ia have
tho hest banking system and the best
statistical information possible. hut
such mechanical provisions can never
prevent depressions as long as people
fail To support the purpose for which
. they were created.
For example. the figures showing
stocks Of goods in the hands Of mer-
chants and manufacturers do not
mean the same thing tina: they did
even TWO wears ago. Instead of the
manufacturers and the merchants
holding the surplus stocks of goods.
today il is the consumer who is hold
Ing the goods which he has bought
on partial payments. Retailers
shelves may be entirely clean. and
. stjll Somc day we may wake up Ia
find that surplus of goods exists and
has mol been paid for. Hence the
ficures Of retail stocks. which most
people are watching with such conf
donce do not now furnish an AIDE
qrate warning Of impending trouble
New Kind of Corporations.
The same factor affects the bank
statements There is a most elaborate
supervision of the banks. ard the Fed
eral Reserve System has worked out
excellent reports showing the banking
conditions in all parts Of the coun-
try. Meanwhile, however, a great
new banking systematic acceptance
curporations-haS sprung up. many
a. which are entirely Independent of
the banks and on which we have no
reports
This should not he construed as a
criticism Of the acceptance and finance
corporations. They are performing an
economic function and are serving A
popular demand However, the busi-
uHSS man and investor who iS hasing
Gii his opinions merely on the regrl-
iarly published bank statements is
getting by no means a complete pic
tllr" "f tho banking situation. Neither
has he any aSSUTa nCC that the opera
tinu Of the Federal Reserve system
however. Skillful il may he can pre-
vent recurrence of overeXpanSion
ami the depression which inevitably
follows.
Blame Is Sidcstepped.
What then. can he done 10 help
prevent another crisis and business
depression? Probably nothing that
VIII he wholly successful. although the
greatest step in the right direction
Is that brings hard times. Every one
believes that some one else is To blame
Employers blame labor, labor blames
he management of employers: both
are ready 10 blame Wall Street, and
AL three groups in such times are
sure that most of the trouble is with
the administration at Washington.
The truth IS that nearly all Of us
have some part in bringing about
these and tho hl9plp
he placed on amy one group. Every one
who tried 10 get something for moth
ing. every one who thinks more about
increasing the price Of his goods or
services than he does OF improving
their quality or quantity: every one
VI" is m"rt-a-in@ his future earnings
or profits merely on tho hope thai
prosperity will continue: every one wh"
tho moment things are going we'll lets
down on the fundamental principles
ni righteousness. industry. thrift and
Who lnseS his spiritual ideals in the
scramble for material things-all of
these have hand in making business
depression.
Question Goes Deeper.
This question goes far deeper than
Is generally realized. II reaches even
into our spiritual lives If vou will
take he trouble to chart the new
membership of churches. YOU will find
that when business is generally pros.
porous there is smaller number of
new church members. When. how
ever. business goes into depression
aud the country * in the midst of
hard times, then the additions to
church membership increase. Ap-
pHrentlE people then turn back to the
sound fundamental principles for
which all churches stand. ! am some
times criticized for preaching ser
mons on religion. but if there is any
factory which has more direct bear
ing on business conditions than the
spiritual factor | have yet IL tind it,
Hence | believe il is foolish to rely
entirely upon any of the safeguard
which have been built up to prevent
crises. The chances are that when
the next crisis comes il will spring
from 4 different quarter than any we
have ever known before and will catch
people unprepared. just as the other
paniCS have in years past. Owing to
our human failinGS. there is danger
when we become too prosperous The
l5abSonChaTt now stands Is per cent
above normal compared with lust nor
NAL Il wear ago. While this is not
Yet alarmingly high from the bust
hess mans viewpoint, vet its rapid
increase durin" the past few months
indicates that il should he closely
watched.
tcopyrieht. 1873