ds this is a good time to buy, and property begins to
change hands. Then hoarded money begins to come out of its hiding
places. Money and credit flow in from other countries, particularly if
business conditions are better abroad than here, for when prices are
lower than they have been, relative to those of other countries, a
country is a good place in which to buy. At the same time that the
money in circulation thus increases, there is a general return of
confidence that increases credit. Not only are there more dollars, but
each does more work. Then old enterprises are resumed and new ones are
undertaken. The purchase of materials in larger quantities causes a
rapid rise in the prices of many raw materials and of all kinds of
industrial equipment. The less efficient laborers and others that have
been out of work, begin to find employment, and then, more tardily,
wages begin to rise. As a result, the costs of many products begin to
rise rapidly. The only classes not sharing in this improvement are the
receivers of fixed incomes. As prices rise, the purchasing power of
their incomes correspondingly falls.

At length prices begin to go up less rapidly, and the question arises
in many minds whether the movement can continue, and if not, when it
will cease. Men wish to hold on for the last profits, and are willing
to risk something to gain them. When prices rise not only as compared
with former domestic prices, but as compared with current foreign
prices, foreign imports are stimulated and exports fall. This calls
for a new equilibrium of money and requires at length large and
continued exportation of specie. This checks prices, and, reducing the
specie reserves of the banks, compels them to be more cautious. At the
same time the increase of costs in many industries begins to reduce
profits. The fall in the value of many stocks and securities held
by the banks forces many brokers and speculators to convert their
resources into ready money. This is the moment of danger; weak
enterprises find their foundations crumbling, and there are many
failures.[6] The falling prices, the shattered credit, and the
financial losses force many factories to close, and many workmen
are thrown out of employment. This moment of widespread loss is the
crisis, It is followed by another period of low prices and of small
output, and therefore of profits small or negative in many industries.
Business must again enter upon a period of retrenchment, f