THE TYPICAL CYCLE
IN an earlier chapter it was noted that business cycles never repeat. Each one is an historical individual. Business cycles are irregular in size and irregularly spaced, and they have widely varying characteristics. Because all business cycles are highly individualistic, and each is different from all the others, a typical cycle is of necessity a kind of mathematical abstraction. It is not closely similar to any actual cycle, but in each feature and characteristic it represents as nearly as may be the central tendencies of many of them.
It is worth while to attempt to construct a typical cycle because the result is a simplified and conventionalized picture of a series of changes that are so beset by irregularities in their original historical forms that they are difficult to study because of their complications. The conventionalized picture presented by a typical cycle facilitates study. It promotes understanding of the changing relationships that are always going forward between and among the major financial series that participate in the successive phases as the cycle expands from depression to prosperity, and then contracts from prosperity back down again to depression.
The material reviewed in this study covers the records of the changes which took place in five series of data during the histories of 24 complete business cycles, and in parts of two others, making 26 in all. These five series are those of business activity, short-term interest rates, bond prices, stock prices, and security issues. This last series is not present until the Civil War period. The data of interest rates are 12 place moving centered averages, and those of security issues are 12 place moving centered totals.
The records of these series were followed through from the initial trough of each cycle up to its peak, and then down to the concluding trough. A count was made of the number of months