Price Movements, 1922-1929
THE generation of men whose business experience covered the quarter century that ended in 1920 had become accustomed, in all their business dealings, to the nourishing influence of rising prices. First there was the relatively gentle rise from the middle 'nineties to the outbreak of the World War, a rise that served nicely to keep labor costs and fixed costs down, that gave that sense of well-being which comes from steadily appreciating capital values and inventories, that gently but persistently lifted business from the doldrums of occasional depression without necessitating liquidation that cut to the heart. Later the stronger stimulus of sharply rising prices carried profits to new levels, swelled the stream of values which is of prime concern to business men, and gave to many the heady experience of sudden wealth.
To a generation thus habituated came in 1920 and 1921 the profound shock of a drop in values more sudden and severe than any they had ever known, a drop which altered overnight the values of the counters in terms of which business is conducted, and changed radically the positions and holdings of all the players in the game. There ensued eight years of comparative calm, during which the conditions left by the readjustment were explored and favorable opportunities were exploited, while those countries and classes unfavorably affected became somewhat inured to the adverse forces released by the war and post-war storms. Then came another catastrophic drop in prices, distorting values, altering profoundly the relative positions of different economic agents, and introducing new uncertainties into business dealings.
An earlier chapter has dealt with some of the consequences of the first great post-war drop in commodity values. Subsequent studies of the National Bureau will be concerned with the character and the effects of the most recent storm. Our present interest lies in the conditions and tendencies prevailing between these two major recessions.