Prosperity and Depression.pdf

Nature and Causes of the 0(1,Part IIthe passage from prosperity to depression. In the ordinary senseof everyday language, in which it is used also by the financialPress and frequently in economic writings, it means a state ofacute financial stringency, panic, runs on the banks, drain of gold,bankruptcies, .etc. A "crisis" in the technical sense-i.e., aturn from prosperity to depression-is usually (but not always)accompanied by an acute " crisis" in the ordinary sense. On theother hand, an acute financial crisis may, and. occasionally does,occur at a time when there is no " crisis " in the technical sense; inother words, it does not always mark the turn from a period ofprosperity to a period of depression, but occurs sometimes duringa depression or even during a prosperity period without turningthe latter into a depression. l§ 2. DEFINITION OF PROSPERITY AND DEPRESSIONIN THE GENERAL SENSEDepression and prosperity may exist in the caseA closetl of a branch of industry, a region, a whole countryeconomy. or the whole world.The international aspects and complications ofthe cyclical movement will be considered in Chapter I I below.In the earlier chapters, the reference will always be to the case ofa closed econolny-by which is meant, not a ~ompletely isolatedcountry, but a country in possession of all the attributes whichwe shall find necessary for the full development of the trade cycle.We 'may therefore have. occasion to allow for outside influences onour " closed" country, even before we turn in extenso to all thecomplications and qualifications in the argument necessitatedby the fact that in the real world we are concerned, not with anumber of independent economic systems, but with a system ofinterdependent and interrelated countries.1 But, as has been touched upon in connection with the discussion ofthe" psychological" theories, the ',' detonation" of a financial crisis islikely to deteriorate the general situation, even if it does not bring aboutan actual turn from prosperity to depression.