d a business cycle. We are now
to study the nature of these cycles.

Sec. 2. #Definitions.# Crisis means, generally, a decisive moment or
turning point. The word crisis suggests a brief period, a moment,
something that is sudden, severe, and soon over. In medical usage
it is the period when the disease must take a turn for better or
for worse. As used in economics, the term, however, implies a sudden
change of business conditions for the worse, a collapse of prosperity.
What precedes has not the appearance of disease, but rather that
of exuberant health. Crises in economics may be distinguished as
industrial, speculative, and financial, according as one or another
influence seems to be more potent, but all are essentially financial.
The change that occurs always is connected in some way with the use of
money and credit.

A financial _crisis_ is the culmination of a period of rising prices,
and a sudden fall which shatters the credit of some banks, brokers,
merchants, and manufacturers. Every crisis is marked by much confusion
and loss and by hasty efforts of individuals and institutions to meet
their pressing obligations. Sometimes this process of liquidation goes
on quietly and in other cases it becomes a wild scramble, each one
trying to save himself, in which case it is a financial _panic_.
An _industrial depression_ is the period of hard times that usually
follows a financial crisis.

Sec. 3. #A feature of a money economy.# Financial crises, by their
very nature, are confined to communities in which the money economy
prevails and where there is a developed state of industry. The periods
of industrial hardship in the Middle Ages were connected usually not
with the collapse of prices, but with political oppression, famine,
wars, pestilence, and scourges of nature. Throughout the lands money
was little used and there was no development of credit and of credit
prices. The money economy began, as has been noted, in the cities.
As the use of money spread, as larger commercial enterprises were
undertaken, as borrowing and the payment of interest became common,
there began to appear in city trading circles, on a small scale, the
phenomena of the modern crisis.[2]

Sec. 4. #European crises.# In Europe financial crises date from 1763
and have occurred at more or less regular intervals since. The common
statement that the cycle of a crisis is run in a period of ten
years, finds only partial support in history. The chief c