The Waterbury Democrat., 1938-07-15

len inventories which started the depression. A number of trade writers and some economists believe that excessive inventories start de- pression and exhausted inventories revive trade.
 The theory is that when mer- chants shelves fill up too much they cut down their orders, fac- tories stop or curtail production, throwing workers out of employ ment and reducing payrools, thus making still fewer purchasers for the already overstocksd merchants, who still further curtail and so on.
 believe too much importance is attached to this. Of course, over stocksd shelves result in reduced orders. When the stocks are dis posed of the orders are increased. The fist phase of this cycle means a curtailment of industrial activity. The second phase means quick ening of activity. Therefore 1t is correct to say that this rise and fall of stocks produces a rise and fall in business activity. But 1t is not the major movement of the business cycle. tI accounts for the minor up and down swings.
 While, therefore, large inventories would have caused a decline in activity, it would not have pro- duced the immense, the almost un- precedented collapse which occurs in few months last year. However, those who thought that large in- ventories caused the recession made up their minds when those inven- ttories were exhaused that rise was near.
 These two currents of thought confidence in resumption of government spending and in the regenerating force of reduced in- ventories - were probably the major causes for that state of mind which would prepare the way for a recovery movement.
 There were two other forces. One was a widely held view that dollar devaluation was near. The writer is one who believes that that is inevitable. How near 1t may be is another question.
 But many circumstances led spec u. .ors to write down the devalua- ton date as close at hand. Rumors floated in to Wall Street from Eng land about proposals for joint &C., ton by the United States and Eng land. About the same time Joseph Kennedy returned from Englano for some undisclosed reason ana Wall Street decided 1t was connected with devaluation. Certainly tips went out of the Street to that effect.
 The other force was the presence of large element of investors with high interest in a small bull market and who were prepared to encourage such a market If 1t deve- loped in order to unload some of their own holdings. This, however. I believe to have been a minor ele- ment.
 There was general business LIldt LIlc DOCJOIu Was pTOUdUly uchI Hatred can wear itself out. Men are in business to make money, not to punish political or economic ene- mics. Many had tired of denouncing Roosevelt and had settled down with 8 strong appetite to make some profits.
 In the midst of this the market rise started. It was not based on actual trade statistics or on trade pictures at t he moment. It was started by those who were ready to gamble that very soon the business statistics would get better. When 1t started it happened that the number who also held this to be a good gamble was large. Then the papers and reporting services broke out into a great chorus of optimism which tended to whip up the movement.
 AS matters stand it IS still a gamble. How much of gamble we will see Monday in MT. Flynn's