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but there can be no doubt that in some years men become confident and hopeful. They think that the country is going to be very prosperous, and that if they invest their capital in new factories, banks, railways, ships, or other enterprises, they will make much profit. When some people are thus hopeful, others readily become so too, just as a few cheerful people in a party make everybody cheerful. Thus the hopefulness gradually spreads itself through all the trades of the country. Clever men then propose schemes for new inventions and novel undertakings, and they find that they can readily get capitalists to subscribe for shares. "This encourages other speculators to put forth proposals, and when the shares of some companies have risen in value, it is supposed that other shares will do so likewise. The most absurd schemes find supporters in a time of great hopefulness, and there thus arises what is called a bubble or mania.

88. Commercial Bubbles or Manias. When the schemes started during a bubble begin to be carried out, great quantities of materials are required for building, and the prices of these materials rise rapidly. The work people who produce these materials then earn high wages, and they spend these wages in better living, in pleasure, or in buying an unusual quantity of new clothes, furniture, &c. Thus the demand for commodities increases, and tradespeople make large profits. Even when there is no sufficient reason, the prices of the remaining commodities usually rise, as it is called, by sympathy, because those who deal in them think their goods will probably rise like other goods, and they buy up stocks in the hope of making profits. Every trader now wants to buy, because he believes that prices will rise higher and higher, and that, by selling at the right time, the loss of any subsequent fall of prices will be thrown upon other people.

This state of things, however, cannot go on very

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long. Those who have subscribed for shares in new companies have to pay up the calls, that is, find the capital which they promised. They are obliged to draw out the money which they had formerly deposited in banks, and then the bankers have less to lend. Manufacturers, merchants, and speculators, who are making or buying large stocks of goods, wish to borrow more and more money, in order that they may have a larger business, the profit seeming likely to be so great. Then according to the laws of supply and demand, the price of money rises, which means that the rate of interest for short loans, from a week to three or six months in duration, is increased. The bubble goes on growing, until the more venturesome and unscrupulous speculators have borrowed many times as much money as they themselves really pos

Credit is said to be greatly extended, and a firm, which perhaps owns a capital worth ten thousand pounds, will have undertaken to pay two or three hundred thousand pounds, for the goods which they have bought on speculation.

But the sudden rise which, sooner or later, occurs in the rate of interest, is very disastrous to such speculators; when they began to speculate interest was, perhaps, only two or three per cent. ; but when it becomes seven or eight per cent., there is fear that much of the profit will go in interest paid to the lenders of capital. Moreover, those who lent the money, by discounting the speculators' bills, or making advances on the security of goods, become anxious to have it paid back. Thus the speculators are forced at last to begin selling their stocks, at the best prices they can get. As soon as some people begin to sell in this way, others who hold goods think they had better sell before the prices fall seriously; then there arises a sudden rush to sell, and buyers being alarmed, refuse to buy except at much reduced rates. The bad speculators now find themselves unable to maintain their credit, because, if they sell their large stocks at a considerable loss, their own real capital will be quite insufficient to cover this loss. They are thus unable to pay what they have engaged to pay, and stop payment, or, in other words, become bankrupt. This is very awkward for other people, manufacturers, for instance, who had sold goods to the bankrupts on credit; they do not receive the money they expected, and as they also perhaps have borrowed money while making the goods, they become bankrupt likewise. Thus the discredit spreads, and firms even which had borrowed only moderate sums of money, in proportion to their capital, are in danger of failing.

89. Commercial Crisis or Collapse. The state of things described in the last section is called a commercial collapse, because there is a sudden falling in of prices, credit, and enterprise. It is also called a Crisis, that is, a dangerous and decisive moment (Greek, kpivo, to decide), when it will soon be seen who is to become bankrupt, and who not. No sooner has such a crisis arrived, than everything changes. No one ventures to propose a new scheme, or a new company, because he knows that people in general have great difficulty in paying up what they promised to the schemes started during the bubble. This bubble is now burst, and it is found that many of the new works and undertakings from which people expected so much profit, are absurd and hopeless mistakes. It was proposed to make railways where there was nothing to carry ; to sink mines where there was no coal nor metal; to build ships which would not sail ; all kinds of impracticable schemes have to be given up, and the capital spent upon them is lost.

Not only does this collapse ruin many of the subscribers to these schemes, but it presently causes workpeople to be thrown out of employment. The more successful schemes indeed are carried out, and, for a year or two, give employment to builders, ironmanufacturers, and others, who furnish the materials.

But as these schemes are completed by degrees, no one ventures to propose new ones; people have been frightened by the losses and bankruptcies and frauds brought to light in the collapse, and when some people are afraid, others readily become frightened likewise by sympathy. In matters of this kind men of business are much like a flock of sheep which follow each other without any clear idea why they do so. In a year or two the prices of iron, coal, timber, &c., are reduced to the lowest point; great losses are suffered by those who make or deal in such materials, and many workmen are out of employment. The working classes then have less to spend on luxuries, and the demand for other goods decreases; trade in general becomes depressed; many people find themselves paupers, or spend their savings accumulated during previous years. Such a state of depression may continue for two or three years, until speculators have begun to forget their failures, or a new set of younger men, unacquainted with disaster, think they see a way to make profits. During such a period of depression, too, the richer people who have more in-come than they spend, save it up in the banks. Business men as they sell off their stocks of goods leave the money received in the banks; thus by degrees capital becomes abundant, and the rate of interest falls. After a time bankers, who were so very cautious at the time of the collapse, find it necessary to lend their increasing funds, and credit is improved. Then begins a new credit cycle, which probably goes through much the same course as the previous one.

90. Commercial Crises are Periodic. It would be a very useful thing if we were able to foretell when a bubble or a crisis was coming, but it is evidently impossible to predict such matters with certainty. All kinds of events—wars, revolutions, new discoveries, treaties of commerce, bad or good harvests, &c.—may occur to decrease or increase the activity of trade.

Nevertheless, it is wonderful how often a great commercial crisis has happened about ten years after the previous one. During the last century, when trade was so different from what it now is, there were crises in or near the years 1753, 1763, 1772 or '3, 1783, and 1793. In this century there have been crises in the years 1815, 1825, 1836-9, 1847, 1857, 1866, and there would probably have been a crisis in 1876 or 1877 had it not been for an exceptional collapse in America in 1873. There is at present (February, 1878) the great depression of trade which marks the completion of one cycle and the commencement of a new one.

Good vintage years on the continent of Europe, and droughts in India, recur every ten or eleven years, and it seems probable that commercial crises are connected with a periodic variation of weather, affecting all parts of the earth, and probably arising from increased waves of heat received from the sun at average intervals of ten years and a fraction. A greater supply of heat increases the harvests, makes capital more abundant and trade more successful, and thus helps to create the hopefulness out of which a bubble arises. A falling off in the sun's heat makes bad harvests and deranges many enterprises in different parts of the world. This is likely to break the bubble and bring on commercial collapse.

Generally, a credit cycle, as Mr. John Mills of Manchester has called it, will last about ten years. The first three years will witness' depressed trade, with want of employment, falling prices, low rate of interest, and much poverty; then there will be perhaps three years of active, healthy trade, with moderatelyrising prices, a reasonable rate of interest, fair employment, and improving credit; then come some years of unduly-excited trade, turning into a bubble or mania, and ending in a collapse, as already described. This collapse will occupy the last of the ten years, so that

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