The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-10-01
DAWES CLAIMS
HELD ERECTED
ON WEAK BASIS
Capital Goods Revival in
Present UpSWing Is
Declared Missing.
BY JOHN T. FLYNN
Times Special Writer

NEW YORK, Oct. Former
Vice-President Dawes has found, ne
says, the law which enables him 10
determine when a major depression
will end. In proof of this he recalls
A statement he made last December
declaring that recovery would be-
gin in June or July of this year.
One thing mars little the sound
ness of his claims. Many other per-
sons made the same prediction last
year and most of them for entirely
different reasons. If the alleged re-
covery proves the Dawes formula
for Soothsaying it proves equally all
the others. Yet all can not be right.
Mr.. Dawes theory is quite simple.
Here it is. Cd Recovery comes. ne
declares, at the moment when mass
confidence returns. % Mass con-
fldence make its appearance five
years and five or six months after
its departure. "a Its return can be
observed by a six months rise in
stock market prices. 81 About three
rise, pig iron prices rise and there
is a rise in steel ingot production.
No Law Discovered
If you look closely you see at
once the general has found no law.
He has merely reduced the history
of two other depresSions- 1873 and
1893 TO charts, found that the
curves behaved similarly in both
cases and leaps to the conclusion
that they will do the same here.
But several points remain un-
answered. Why did the general
study only two depreSsionS? Why
not the depreSsions of 1856, 1881
and 1890 as well, all of which were
major depreSsionS? In each case he
would have found the period of en-
durance different from 1873 and
1893 as we'll as different from each
other that would have knocked his
theory into a cooked hat.
Even the depressions of 1873 and
1893 offer grave questions for the
theory. In the 1873 slump, did re-
cOvery begin in the winter of 1873
or 1879? AS for the depression OF
1893-so-called-waS it really the
depression of 1893, beginning May
4, as General Dawes says, or was
it really the continuance of the de-
preston of 1890 and a deepening Of
that?
Capital Goods Lag
But there is another point. In all
these depressions the cause of re-
vival was a revival of the capital
goods industry, plus some other
forces. But in this depression, where
is the revival of the capital goods
industry? Instead of that we have
had what, in many respects, is it's
equivalent-the pouring of govern
ment borrowed funds into the eco
nomic blood stream.
Government borrowing and
spending has taken the place of
private borrowing and spending in
capital goods. But what force was
it which made the Roosevelt ad-
ministration start borrowing and
spending two years ago, just in time
to have that policy make itself eff
fective to produce recovery right on
the generals schedule? Had there
been no government borrowing and
spending would there be what the
general now calls recovery, arriving
on the dot?
But-and this is important-have
we got recovery? A lift in business
yes. When we have a lift in business
flowing from the activities of bust
ness itself and not supported by
vast government subsidies we may
say we have recovery. But 1 deny
that the lift we have can be called
recovery.
Copyright. 1895. NEA Service. Inc.j.