Economic Theory From 1905

Reprinted from “How to Buy and Sell Real Estate at a Profit” by W. A. Carney, published in 1905, and now in Public Domain.

Observers who have made a study of the matter claim that booms and panics occur in cycles.  Professor Levi says:  “The most confident advocates of the theory of periodicity assign to these cycles a definate or nearly equal curation of ten to twelve years.  According to John Stewart Mills, this sycle is divided as follows:  After each panic or crisis the first three years will witness diminishing trade, lack of employment, falling prices, a lowering rate of interest and very considerable distress.  Then there will be three years of active trade, slightly rising prices, fair employment, improved credit.  Then will come three years of unduly excited trade, in which speculation will be rife, prices will rise rapdily, and an unusual number of new enterprises will be begun.  The tenth year will be one of crisis, followed by three years of depression.” — (Burton’s Financial Crises.)

So, to paraphrase this wisdom from 1905:

Year 1:  Crisis

Year 2, 3, 4:  Depression

Year 5, 6, 7:  Recovery

Year 8, 9, 10:  Boom   (then the cycle repeats)

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