This checks prices, and, reducing the specie reserves of the banks, compels them to be more cautious.

At the same time the increase of costs in many industries begins to reduce profits.

The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money.

This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures.[6] The falling prices, the shattered credit, and the financial losses force many factories to close, and many workmen are thrown out of employment.

This moment of widespread loss is the crisis, It is followed by another period of low prices and of small output, and therefore of profits small or negative in many industries.
Business must again enter upon a period of retrenchment, for it has completed another cycle.
Sec.7.