ments, new companies were formed, and so the produce of their manufacture was extended to such a degree that the prices went down and the profits vanished."
As prices fall and profits shrink, producers working on insufficient capital, or by imperfect methods, are soon obliged, in order to meet impending obligations, to force sales through a further reduction of prices; and then stronger competitors, in order to retain their markets and customers, are compelled to follow their example; and this in turn is followed by new concessions alternately by both parties, until gradually the industrial system becomes depressed and demoralized, and the weaker succumb (fail), with a greater or less destruction of capital and waste of product. Affairs now having reached their minimum of depression, recovery slowly commences. Consumption is never arrested, even if production is, for the world must continue to consume in order that life and civilization may exist. The continued increase of population also increases the aggregate of consumption; and, finally, the industrial and commercial world again suddenly realizes that the condition of affairs has been reversed, and that now the supply has become unequal to the demand. Then such producers as have "stocks on hand," or the machinery of production ready for immediate and effective service, realize large profits; and the realization of this fact immediately tempts others to rush into production, in many cases with insufficient capital (raised often through stock companies), and without that practical knowledge of the detail of their undertaking which is necessary to insure success, and the old experience of inflation and reaction is again and again repeated. Hence, the explanation of the now much-talked-of "periods" or "cycles" of panic and speculation, of trade activity and stagnation. Their periodical occurrence has long been recognized, and the economic principles involved in them have long been understood. But a century ago or more, when such a state of affairs occurred in any country, it was mainly confined to such country, as was notably the case in John Law's "Mississippi Scheme," or the English "South-Sea Bubble," in the last century, or the severe industrial and financial crises which occurred in Great Britain in the earlier years of the present century—and people of other countries, hearing of it after considerable intervals, and then vaguely through mercantile correspondence, were little troubled or interested. During recent years, however, they have become less local and more universal, because the railroad, the steamship, and the telegraph have broken down the barriers between nations, and, by spreading in a brief time the same hopes and fears over the whole civilized world, have made it impossible any longer to confine the speculative spirit to any one country. So that now the announcement of any signal success in any department of production or mercantile venture, at once fires the imagination of the enterprising and reckless in every country, and quickly incites to operations
