How Long?

Before the Chicago Association of Commerce on December 12, 1934, Chairman Charles Gates Dawes of City National Bank & Trust Co. predicted that a sustained upswing in the durable goods industries would begin the following June or July. Nothing happened in June, and as late as June 27 economists including Cleveland's Col. Leonard Porter Ayres saw no signs that General Dawes was right. But less than two weeks later (TIME, July 22, 1935) steel ingot production suddenly began the rise which has been virtually continuous ever since. By this modest but clean-cut feat Banker Dawes gained a reputation as a Recovery Prophet.* Starting up from his laurels last week, "Charlie"' Dawes published a 45-page book, How Long Prosperity?, in which he risked another and equally definite prediction. His answer to his own question: barring currency inflation or war, a "high degree" of prosperity will continue until the autumn of 1939, when another stock-market collapse will bring on a "minor business recession" of one or two years, followed by more prosperity. When that may end in another depression like the last Banker Dawes makes no attempt to predict.

Reprinted as two of his five chapters are his argument of 1934 and a later speech explaining its genesis. Inspired by the over-complexity of professional economists on the subject of the business cycle, the original Dawes plan was to reduce the last three big depressions to their simplest terms, draw parallels for the current guidance of businessmen. Putting the months of the stockmarket crashes of 1873, 1893 and 1929 on one baseline, he superimposed charts of durable goods activity for the following ten-year periods. In each of the earlier depressions pig iron production & prices began to recover exactly five years and six months after the crisis. Banker Dawes placed his bet accordingly. Stockmarket averages compared in the same way showed the course of recovery interrupted in 1883 and 1903, in the tenth year after the market crash. Hence Banker Dawes's new prediction for 1939.

*For the Dawes family, Recovery was well enough advanced last week to enable it to pay Reconstruction Finance Corp. double liability of $1,027,600 on stock holdings in Chicago's destinct Central Republic (Dawes) Bank & Trust Co. (TIME, Nov. 16).

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