The spirit of speculation grows till often it becomes almost a frenzy, and people rush toward this or that investment, throwing capitalization in some industries far out of equilibrium with that in others.
The cause of crises immediately back of the maladjusted capitalization thus is seen to be a psychological factor; it is the rhythmic miscalculation of incomes and of capital value, occurring to some degree throughout industry, but particularly in certain lines.

This subjective cause in men is given an opportunity for action only when certain favoring objective conditions are present.
Sec.11.

#The use of credit.# Most noteworthy of these objective conditions is the general use of credit.

The credit system greatly enhances the rhythm of price.

If the value of a thing that is fully paid for falls, the owner alone loses; but if the value of a thing only partly paid for falls so much that the owner is forced to default in his payment, the loss may be transmitted along the line of credit to every one in a long series of transactions.