CHAPTER 10

CRISES AND INDUSTRIAL DEPRESSIONS

REFERENCES.

_Dewey, D. R._, Financial history of the United States, 4th ed., 1912. Ch. X.

_England, Minnie T._, Promotion as the cause of crises. Q. J. E., 29: 748-767. 1914-1915.

*_Hamilton_, Readings, 91-93, 93-95, 95-98.

_Hobson, J. A._, Evolution of modern capitalism. Ed., 1912. Ch. 7.

_Jones, E. D._, Economic crises. 1900.

_Juglar, C._, and _Thom, C. W._, A brief history of panics and their periodical recurrence in the United States. Ed., 1916.

*_Materials_, 391-396.

_Mitchell, W. C._, Business cycles. 1913.

_Moore, H. L._, Economic cycles: their law and cause. 1914.

_Nelson, S. A._, The A B C of Wall Street. 1900.

_Patterson, E. M._, The theories advanced in explanation of economic crises. A. A. A., 59: 133-147. 1915.

*_Phillips_, chs. XXVIII, XXIX.

*_Source Book_, 138-156.

_Sprague, O. M. W._, The crisis of 1914 in the United States. A. E. Rev., 5: 499-533. 1915.

_United States Bureau of Labor_, Annual report for 1886.

QUESTIONS.

1. What is a financial crisis? An industrial depression?

2. Describe the trade, banking and price conditions which obtain just preceding, during and immediately following a crisis.

3. State clearly and explain the movement of prices of stocks, bonds, mortgages, land, commodities generally, wages and interest rates on long time and short time loans, before, during, and after a crisis.

4. Tabulate for a series of years covering periods of prosperity and depression, the prices of stocks, bonds, real estate, and of some commodities.

5. What economic changes occurred in your own community in the panic of 1893-94, or in the years 1903-04, or in 1907-08?

6. Is it possible that the amount of all goods produced shall be in excess of the community's power of consumption?

7. "As the average American can produce far more than he can consume, it has been proved repeatedly that as long as the sale of his products is confined to the home markets, over-production is certain to be a natural consequence of every prolonged period of activity. For half a century, therefore, with regularly recurring seasons of surplus production, there came those inevitable commercial crises which emphasized with increasing force the necessity for foreign markets." (This passage is taken from a reprint of a speech of a congressman.)

Criticize the view as to the cause of commercial crises expressed in the above statement.

8. Is a crisis caused by too much or too little money, or by some other influence?

9. If there were twice as much money in the world, would panics take place?

10. In a period of depression is there less money than usual in the country? In the banks?

11. In what ways and to what extent are trade conditions apt to be affected by:

The increasing gold supply?

The trust movement?

Increasing armies and navies?

The agricultural situation?

12. Explain the difference in the motive of the borrower at ordinary times and in times of panic.

13. How are loans affected when the reserve limit as established either by law or custom is reached in England, Germany and the United States?

14. What in your opinion is the correct explanation of crises?

15. In what ways is business affected by the condition of the crops? Within what limitations? In the case of which crops is the connection closest?

16. What element of security is furnished by clearing houses during panics?

17. Describe the method used by the banks in meeting demands of depositors during the panics of 1893 and of 1907. (Dunbar is especially valuable. Also O. M. W. Sprague, History of crises under the National Banking System, pub. by Nat. Monetary Com.)