es 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 income 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 wh