The Washington times., 1930-12-27
NEW YEAR SEES
TRADE CYCLE
TURNING Up
Worldwide Depression Is Due
For Change, Economist
Believes; Slow Rally Seen
BY LEWIS HANEY

Director New York University
Bureau of Business Research
and Former EcononIist OF
Federal Trade Commission
In this and several following
articles I will endeavor to give q
true account Of the business stu
alton and draw conclusions as to
the outlook for 1881.
The best way to begin Is by not
ing that business In this country
always has moved, and probably
always will move, in "cycles." ;"
Quite regularly we find commod:
ity prices and industrial produc-
ton rising for about two years.
Then comes a crisis, and prices
and production fall for a year or
q year and a half. Expansion,
boom, crisis, recession, and depres-
sion follow one another regularly.
1t is also important to note that
there are major" and "minor"
business cycles. The major ones
come about seven to eleven years
apart. They are apt to be world
wide and are very severe. The
last major cycle came in 1919
1921, so business is running true
to form in going through another
bad one in 1929-1930.
Depression Worldwide
This is what we must under
stand. We are in the midst OF q
'major" world wide business de-
preston, resulting from the big
gest boom the world has ever seen.
In a way, this may seem discour-
aging because it is so inevitable.
But really it is encouraging be-
cause it suggests that the ultimate
recovery will be just as certain.
The truly discouraging thing Is
that so many Of us would not rec
ognize the nature Of the recession
when 1t came. We tried to fight
against it and adopt artificial
remedies. This has probably re-
tarded the recovery by preventing
the prompt curtailment Of pro
duction and the liquidation OF
credit that are required before the
recession can finally end.
At the end of 1880, we find bust
ness will rate along in the receS-
sion part of the cycle. We have
been on the down grade for about
a year and a half. Industrial &C
tivity is now just about 80 per
cent below "normal"-by normal
meaning the level where the aver
age volume of business would have
been if it had continued up at the
rate of the past 10 or IL years.
This is very great recession.
It is actually further below nor
NAL than business went in 1911.
Some figure that we have to go
back to 1908 to find q recession
of such depth.
This fact, too. has its encour-
aging side. It means that our
industries are producing much
less than the normal or average
requirements of consumers. It
suggests that the recession has
at last run nearly far enough.
In fact, we seem to be in the
cycle about where We were in
early 1921 or late 1893, which
means near the end Of the declin-
ing part. In another month or so
we may expect to find the pres
ent large stock Of commodities
beginning to diminish, and the
prices Of basic raw materials
Stabilizing.
Caution Advised
But like q sick man we must
not try to get out Of bed too
soon. The period Of GONZALES
cence lies ahead and the healing
processes are not complete. While
production has been curtailed,
stocks Of commodities in pro
ducers' hands are still very large.
Prices Of raw materials are mostly
low, but finished goods are not
yet reduced in proportion. Specu-
lative credit and brokers' loans
are well liquidated, but bank
loans on collateral or investments
are still too large.
No one should expect In day
to get over one Of the worst buSi-
ness obstacles history has known.
There are still some final read
JuStmentS to make. But at the
beginning Of 1891 we find our
selves also at the beginning Of
the end Of this cycle.