The Capital Market and the Securities Act

Report Outline
The Mechanics of Recovery: Consumption vs. Investment
The State of the Capital Market
The Federal Securities Act of 1933
Social and Economic Consequences of Securities Act
Special Focus

The Mechanics of Recovery: Consumption vs. Investment

Role of the Capital Goods Industries in Recovery

In the united states, as in other capitalist countries, sustained recovery from depression has usually been marked by a revival of the capital market and a resumption, with the proceeds of new security issues, of large-scale investment in fixed capital goods. New security issues have fallen during the present year to the lowest level in a generation and, notwithstanding the improvement in other lines, the capital market as yet gives few signs of recovery.

In the present depression, as in past depressions, it has been the heavy industries producing durable or capital goods which have suffered the most severe declines in output and have contributed most largely to the prevailing unemployment. The output of the industries which turn out goods for immediate consumption has been relatively well maintained. While comprehensive statistics to establish this point arc lacking, it is believed that the output of the light industries has been maintained throughout the depression at a level approximating 75 per cent of normal, while the output of the capital-goods industries, including construction, has fallen as low as 25 per cent of normal.

The Capital Goods Industries in the Strategy of Recovery

The present NRA program looks principally to a stimulation of the market for consumers goods. As to the capital-goods industries, the theory has been that an enhancement of the possibilities of profit for the consumers-goods industries would stimulate new investment in plant and equipment for the production of these goods, thus restoring the market for producers goods.