WORLD DEPRESSION

Wanganui Chronicle, Volume 73, Issue 425, 17 November 1930, Page 9

WORLD DEPRESSION

ANOTHER YEAR TO GO GENERAL DAWES’ VIEWS CAUSES AND EI’FECTS Ambassador Dawes, as guest at the Lord Mayor's luncheon in Belfast recently, made a speech in which he discussed tnc psychological causes of the present world depress.vn nnci ventured the suggestion that business would be normal again by the summer or fall of next year, says the New York TimesAs his excuse for talking of the affairs of the world and the United States in particular, General Dawes naid it would be inappropriate for him to try to tell Belfast business men about their own affairs.

•'A world depression in business," General Dawes continued, “is due always to a sudden change of attitude or the world's people. This changed attitude is oftbn explained in different countries as being the result of; diverse causes, including unwise national policies, undue speculation, overproduction, under-consumption, and political or social upncavals. These, however, are more the effects of this change of general attitude than causes ot it. It is often easier to conclude that one catastrophe or error in business is the cause of the following one rather than that both originate from one underlying cause. Preceded by Stock Crasn “In me United States, for instance, as well as elsewhere, a major depression in business always has been preceded a few months before by a stock panic induced by over-speculation-Many have assumed that, the collapse of the stock market caused the later depression. Many assumed, too, that this correct forecasting uf business trends by stock speculators is evidence of the composite intelligence of the speculating class. Nothing could be more untrue, for not only is the speculating class as a who*e no wiser than those in other business, but no intellectual judgment of the future can always prove right, and in this case the general unloading of stocks months before general business is materially affected always occurs. “The truth is that the stock market depression and the following business depression are both caused by the same thing—a fundamental change in the attitude of the average man, resulting from a sudden loss of confidence on his part, the first public manifestation of which occurs on the Rtock Exchange. The reasons why the Btock Exchange gives this first evidence of the change in the general attitude are simple. “Business on the Stock Exchange is transacted under unique conditions, conducive to almost immediate public registration of the general lack of confidence in values. On the Stock Exchange when confidence 1n the future is rampant every facility exists for speculators to get easily into debt and in proportion to the thinness of their margin and larger amount of stocks they carry upon a given capital investigated as a margin, the larger do they compute their prospective profits and, contrariwise, when their optimism falters the quicker will rney run from a prospective loss, necessarily proportionately as large.

Merchandise Slower Moving A man with merchandise to sell, on the otner hand, when he commences to lose confidence in vunres, will dispose of it gradually. Ho is not generally under the necessity, when the market, drops, of immediately putting up additional margins ot security to his creditors if ho prefers not to sell just then. When the market slackens ho does not. have the fear of being sold out. by somebody else if he prefers to take his own time in selling. Moreover. in general business, so much of which is concerned with the supplying of human necessities, there is a greater continuance in demand, ano, In consequence, in times of depression a slower market, decline than in stocks, the demand for which lessons more abruptly. Nevertheless, the fundamental «uuse of the decline in both is the

“Let us consider the fundamental cause. The comments of learned economists differ so widely in respect to it and the probable time of continuance of the present world-wloe business depression that wo laymen may be excused for seeking simpler explanation*. The qualities of composite mankind are but. the qualities of the average of individuals comprising it. As the average man in his personal or business activities occasionally departs ?rnm the usual, so does mankind. As a man sometimes cuts loose Iron, safe business moorings, so does mankind. As a man sometimes embarks upon the unknown and dangerous seas of speculation and unsound enterprise, so does mankind, and what then happens to man happens ♦o mankind. The Reaction after the Boom “We don’t, know why a tniui goc* wrong, but we have no difficulty in knowing when. Thus with mankind After a hectic period induced by » regrettable combination of over-con-fidence and misdirected energy, the reaction and return to a normal view things causes first a business collapse, then a period of stagnation, then a period of recuperation. “The business of mankind is now in the stage of recuperation. W« know that in a genera! way, under the law of action and reaction, periods of under-activity in businass arc somewhat proportional in length to the periods of over-activity preceding them.

“I’hat. time is now considerably over u year behind us when the public suddenly ‘turned over’ from exhilaration and that confidence in the future which is the basis of prosperity, so that, lack nf confidence which is the basis of business depression.

“T do not think the business of the world left its normal trend earlier than 1927, two years before the collapse of prices in 1929 on the loading stock exchanges of most, nation*, if T am right in this, other things being equal, may we not hope to see the normal trend of world business resumed by the summer or fall of next year, which will mark the end of the after two-year period? Exceptional local conditions may, in this or that country, advance or retard the healing effect of returning world business confidence, but nothing js more certain than the coming of business recovery. The business fool in 1929 was he who hnd no fear. The fool now is ho who has not hope.”