Page:The Economics of Unemployment.djvu/63

of a revival, growth, culmination, and decline of trade, in relation to the part played by bank credits.

When a trade depression with low production, low consumption, and low prices and profits, has gone on for some time, the excessive stocks which, congesting the markets, brought prices down, show signs of depletion, and it becomes evident that the current low production will soon be insufficient to meet the demand, and that prices are likely to recover. Merchants handling wholesale trade in the world market are naturally most sensitive to the situation, and they are usually the first to take action.^[1] In anticipation of a growing volume of sales at higher prices they make contracts with manufacturers and other producers for future delivery of materials and goods. These producing firms, desiring to replenish their depleted supplies of raw materials, fuel, etc., in preparation for a renewed activity in their mills and workshops, require money for these purposes and for other working expenses, and apply to their banks for credit, adducing the contracts they have made with merchants as evidence of a reviving trade, rising prices, and profits, and a consequent ability to meet the overdraft. The fundamental and instrumental industries, such as mining, engineering, shipbuilding, and metals, where the depression and unemployment have been deepest, must get to work first, in order to make adequate provision for the renewed activity in the later stages of production, and must similarly have recourse to bank assistance for their working expenses. For, until the output of fuel and material has been increased,