"Business is sound in the states, credit is as a whole good, and in spite of the fact that you are now in the negative phase of a long cycle of business history, conditions will pick up in 1931", stated Josef A. Schumpeter, professor of Political Economy at the University of Bonn, who after the war was finance minister of Austria.
"The real gist of the whole matter", he continued, "is this: The present economic situation in the United States and throughout most of the world is a normal reaction to the strong business development from 1922 to 1928. During this time conditions were unusually good and as this too great prosperity could not last, a new level had to be found. So far we have not attained that level."
Outlining the causes of the present economic conditions, which in turn were responsible for the great downward period of the long business wave he said, "Bad financial conditions in Europe created an unsteadiness in America, this waver in business was further increased by over speculation in stocks, and the whole thing was given another thrust in the wrong direction by the agricultural crises. We can further add a number of special causes, the over-production of mootr cars, for example. Again, there are various things that only show themselves during a crisis, all the result of a general lack of public buying power."
"The stock market is like a cough", he continued, "at first only irritating the throat very slightly, but gradually getting worse with each successive explosion until it has to stop. In the same manner each drop in the market will lead to another low level, and finally, after the general process of weeding out all uncertain securities has been completed, a rise will necessarily follow."