Show BUSINESS CYCLES GYC lES FORM SOURCE I OF DANGER I Catch C Phrase May Upset Many fany Business Men Ien and and Investors S WELLESLEY HILLS Mass Mas Jan 20 1 I dont don't know which Is Js more mora perilous to disregard aril the cycle altogether or to get a II smattering of ot It tt without really understand understand- ing log understanding It says Roger Koger W V Babson In II a executives statement Issued today Many lany tives tins think the they ha e got the tho business fortunes cycle by the tall tail and that their for for- for tunes arc are made These thinkers who have hate ha e picked up the bun bun- bunness ness bun ness flees cycle aa as the tho latest catch phra are simply th edged toOls and are re going to gt t badly cuL cut It Is astounding how the public bootblack has ha taken up the Idea From Irom boot boot- boot black stands to International confer confer- conferences conter the latest fad Is the business cycle It If It nero ere ero merely talk talk little harm would be ba done Hut But many bust bust- busi business nets ness men bankers Investors In ant government offIcials are arc making real commItments Imaginary on the ba ls of an imag- imag Imag somebody inary mary cycle It Is high time that somebody get up In meeting meeting- and do some plain talking talking- and tell that Vt ne e are all sitting around a pow pow- pow der powder keg kec If it we continue to thIs delusion of a fixed filed cycle NO O FIXED INTERVALS ALS Strictly speaking there thero Is la no suca thing as ns a 1 bu business cycle continued Mr Babson It Is a a serious blunder to assume that there thero will be bo years or other fixed Interval I of ot 0 over e and then ee years of 01 do- do de dc depression 1 followed by another three I years ot or 0 over expansion and another I year ear of depression To nine people out of o ten this tills Is what the tho business C cycle cicle cle seems to mean a pe peI pa 1 1 procession of booms and bump bumps each each lasting the same f me number of years There Is absolutely nothing tr Ii this idea and any executive e who at- at at tempts attempts to base babe his plans thereon will probably ruin the enterprise for wh ii h ho he Is responsible The arning p plies piles also to bankers banken in Investors estors and statesmen PI My advice Is to g set get t It out of ot your heal immediately that business fluctuates In III three ear ear car periods or any oth other r fixed Intervals The real prin principle I ciple of the business movement IS that of action and reaction Namely I L l period of ot over expansion tends to tobe tobe be toll followed owed by an equivalent period of And when I 8 siy sy equiv equIv equIv- equIvalent I alent I am ani taking into account tho two factors duration and 1 Moderate to business activity prolong d 0 for ses se several erat eral years vears Is equivalent to x x reme activity of or shorter duration C r PJ r TD J To take the tile latest example there therl was a period of over expansion 0 t er-t COY COY- erinc cov-erinc the years 1919 1915 This ten tend 11 to bo balanced by 1 a ing compensating period of ot depression But ems compensation might take a of forms It there had been a prodigious and excessive e crash in 1920 only a sear icar ear this would 1111 have hase e been Sufficient compensation com It tt would ha e offset four vears ears of ot o ore or r-e r Or If the the decline in 1920 had LeeO trifling but hut dragged o out t for tor year years to come como this al also o would bo be compensation Whet actually hap happened I p n d nag nas a sharp decline decline not tn the worst Imaginable but iut still a II se eru drop The period has already ox- ox ex extended tendo tended more than two years ConsI I- I l-crin l erinI both oth the severity of the drop and the time timo that has elapsed Its It's it s plain that ae no e ha hae have e nearly paid tilt tin bill bill In full B By time Is The rhe question wh whether ther depression has lias I Itse- Itse list listed t- t ted ed a month or a decade has no sly whatsoever er B Bv liv In- In Intensity In Intensity means nothing The whether depression luis has been drastic or t rh lal has no significance How How- over How 0 oer er when these t tao 0 arc aro combine when vou ou get Jet the product of tIme limo and Intensity you are arc on a sOlin souni basIs This and This and this only only-Is only Is the true measure of depression and the tho thereal real Interpretation of or the business cycle clo LENGTH or OF PROSPERITY At the pr present juncture l what would be tho the result of ot sudden and reckless inflation This would mea that Instead of progressing In an o 0 oi- oi derly deny derly way ay ay up from front depression Into pro pi we would bo ho a cut short We Ve would wo be trying C evade the end tall of our quota ot of depressIon There would ouid be a I which whIch would last until that quota v completed At the moment there thore I is no sign of or such Inflation Tho The Indi- Indi Indications Indi Indications arc are that tho the remaining frag fr- fra fragment ment of or the allotted depression willbe ss ill be wiped out in due course and witha is a clean slate Into to toVo wo we shall hall be ready for forthe forthe the next period of prosperity Will ill 1 our next period of ot prosperity he be bir bl or small The question is pe- pe peculiarly pe peculiarly difficult After a bl big biff perlo period of 0 over expansion a n bl big action it is h practically certain th that t ther there will ho he hea hoa hoa a big pc period of a big re- re reaCtion re reaction action Knowing the action ou can forecast the reaction but reaction but tho the rule rulo rub is hard to work both ways To Iu 1 illus illus- illustrate Illus Illustrate It if you ou stretch a spring a 0 certaIn certain tam tain amount you can forecast what hat will be bo the reb rebound und But Dut ou cant can't so easily foretell how tar far the tho spring will be stretched the next nett time Hence periods of ot prosperIty or action are arc far tar more difficult tu to forecast than periods of depression or reaction DV Cr ADVA Cn NOTICES Howe However cr we know that there Isa Is Isa Isa a gener general 1 tendency toward equality In other words nords In the long run perI- perI perIods peri periods ode of prosperity tend to b bo about equal Th They y yary vary ary greatly In duration and the they vary ary greatly In Intensity nut the Intense period periods are usually short ahot and the tho mila mild perlo periods s arc are usuaLly long so 50 that the area or moss mass mos Is ro- ro ro constant Though the form of the ne next t period of prosperity Is still undetermined wo ne 0 know In ad- ad ad 1 vanco nce with reasonable assurance th tIts Its area arell or mass maes will be approximately that of pre previous lous periods Shortly after It has lias begun to develop elop there thero may molY mayb maybo bo b a II clue to It Its It probable form Intense e and brief or or mod mod- moderate mod moderate erate crate and prolonged Besides this principle ot of o action and reaction there Is 1 I another feature or orthe orthe the business busine's cycle that can con safely Ce be applied In practical ways WIlS Every busi busl buel- buel business ness noes and nd every ever locality y has hils Its own particular place In the tho cycle ccle The bond market for example I Is usually far In the lead declining d or adS IId advancing anc- anc nc- nc ing log before other factors show a 1 ot of trend The tock Block market also alAO has hasa hasa hasa a pronounced lead load Though not so 0 as s the tho security markets build building ing Ine Is somewhat In iii the van an as corn com pared with aith Ith other lines of business actis Ity Near the tho other extreme extremo Is retail trade which Is a laggard both bothon bothon on the up-sv up s up and the down down- downswings downswings swings Comparing sections or of the country the tho manufacturing centers tend to lead and the regIons of production of ra raw w m tsal to lag Comparing the physIcal quantity of business with It Its doll r Salue alue quantity advances or value In a store the num ot of sales Bales slips physical quantity tends register relIster to decline before the cash rel- rel reg I ister readings amount ot or sales In dollars In a construction industry the number of permits tends to do de de-clino de dine before their value alu In ANALOGY D But the thing or of o real Importance Is not merely to know this sequence sequence- sequence which proposition but Is a f fairly simple proposItion proposItion- but I but also to know how low fast the I of depression or over oser 0 er lon Is b Ing b-Ing In ing run off oft For example early In 1920 the stock market turned don The rhe retailer who ho noticed this re ersal and attempted to when shen hen th I lightnIng would strike his own o bual- bual busl I Incas ness would have hase hl e been at a loss to setI SelI Set Sel I the dAte But presently when shen hen general business sank belo below par and begs I to sweep out an area aroa of depression then the retailer wai 01 able to forecast I Kno how much depre depression slon was I wasI due and how fast It was being worked IoU off and knowing also lii hl his relative po- po poI position po position In tho cycle the retailer could very sery cry closely when hen his turn I was coming To To Illustrate the real ral meaning ot of otho tho business cycle C cle one of or the best analogies is to compare it with elec electricity ele Call prosperity electric yer po and ft i 41 A that you are aro entitled to kilowatt hours It If vou ou I iun un your outfit at 10 kik watts you last 1000 hours If It at 1000 kilowatts kilowatt ou last only 10 hours hous Or you can I e at kIlowatts and hat hours The word ord business C h F really not tho the v ord to use C Ie Ic Implies time timo It Is 19 urea area or mass which lis I Is the tho Important measurement Ther TherIs I Is no real need of eIther cither 0 oer er over 1 LIon or depression We Yo could run rUl I lIon along at a steady tren treni I 1 indefInitely nith Ith C cles practically d j The Tho principle of f Mr A and nd reaction tHiT Is absolutely ly sound but lIf the conception ot of the tha cycle Is both un- un unsound un unsound lIS sound and dangerous ETHICS NEGLECTED To be bo concrete business concrete business is now statistically at norme normal By Ey the so- so called so-called called business ode ccle we so 0 aro at a bej 11 center rhe shows thIs very clearly clearl Dut But this Is no reason shy hy hye we e must stay thero or why the I lest movement will not be for th the bettor or for the It all ull do- do deI de depends I upon how Wo We act act ct to Rt 1 one another nother and act toward the ret rest ot of the world When hell Gree Greed 1 Is an- an we are headed for depres depression s when slon-when sion when Service Is i In the saddle 1 10 0 are headed tor for Prosperity If there was liS less talk about business cycles and more about business ethics It would bo be bettor for all 1111 ot of otus ofus otus us |