Prosperity and Depression.pdf

Chap. II The Up-turn: Revival 377the breakdown of a boom along similar lines as in the precedingpages, with some variations in detail (mainly of a terminologicalnature). He attempts to put them in the order in which theyare likely to appear successively in time, and likens the boom to apeculiar steeplechase where the .horse has to overcome a seriesof hurdles and is almost certain to fall. at one of the obstacles.B.The Up-tllrn : Revival§ 6. INTRODUCTIONWe have now to answer the question what theThe order limits of a .cumulative contraction process may be,of the and how it can be brought to an end. How is theargument. downswing usually stopped and reversed? Inmany respects, we need only adapt the assumptionsand arguments adduced when we discussed the opposite problem:viz., that ofthe down-turn. Without pressing this parallelism toofar, we may proceed in the same order which we adopted there.In § 7, as a first step, we shall discuss the inflationary counterpartsof the deflationary shocks analysed in § 3 of this chapter.We assume the occurrence of certain changes-such, for example,as an inflationary move on the part of the monetary authoritiesor anybody else, or a favourable turn confined to a particularindustry-and investigate how this may bring about a generalexpansion. We leave open for the moment the question whethersuch changes are more likely to occur in anyone phase of thecycle-e.g., the latter part ofthe depression, rather than in any other.In § 8, as a second step, we shall show why, after a contractionhas continued for a time, the economic system becomes more andmore sensitive to stimulating influences, in the same way as withthe progress ofan expansion it becomes more and more exposed todeflationary shocks.In § 9, as a third step, we shall discuss those favourable reactionsand stimulating influences which are likely to be brought about inthe economic system after a contraction has gone on for some time.The logical relation between the second and third steps mayalso be stated as follows. A process of contraction is likely inthe course of time to exhaust its strength and lose its momet!tum.