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h employment active and prices rising, and order books congested; or else right on the crest of the boom, when prices were no longer rising generally, though they had not yet commenced to fall, when employment was still good, but when new orders were no longer coming in; or else in the early stages of a depression, with prices falling, and every one trying to unload stocks and failing to do so, and works beginning to close down; or else right in the trough of the depression where we are to-day; that we were at one or other of the innumerable stages of the trade cycle, without any prospect of remaining there for very long, but always, as it were, in motion, going round and round and round. What are the root causes which bring every period of active trade to an inevitable end? There are two which are almost invariably present towards the end of every boom. First, the general level of prices and wages has usually become too high; it is straining against the limits of the available supplies of currency and credit, and, unless inflation is to be permitted, a restriction of credit is inevitable which will bring on a trade depression. In those circumstances, a reduction of the general level of prices and wages is an essential condition of a trade revival. A reduction of prices _and wages_. That point has a significance to which I will return. The second cause is the distorted balance which grows up in every boom between different branches of industrial activity. When trade is good, we invariably build ships, produce machinery, erect factories, make every variety of what are termed "constructional goods" upon a scale which is altogether disproportionate to the scale upon which we are making "consumable goods" like food and clothes. And that condition of things could not possibly endure for very long. If it were to continue indefinitely, it would lead in the end to our having, say, half a dozen ships for every ton of wheat or cotton which there was to carry. You have there a maladjustment, which must be corrected somehow; and the longer the readjustment is postponed, the bigger the readjustment that will ultimately be inevitable. Now that means, first on the negative side, that, when you are confronted with a trade depression, it is hopeless to try to cure it by looking for some device by which you can give a general stimulus to all forms of industry. Devices of that nature may be very useful in the later stages of a trade de
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