90 The Stock Market Crash—And After 
ing the panic, it would seem that the level of stock 
prices was constantly at a slower rate of increase 
than the rate of earnings of corporations. As com- 
pared with 1928, this ratio had been reduced by 
careful selection of stocks in the market until the 
panic brought the entire level of stocks down to a 
point comparable with the old ten-to-one ratio that 
prevailed prior to the period of increased “tempo” 
in business, so thoroughly described in the report on 
Recent Economic Changes. 
That is too low a ratio of stock prices to earn- 
ings. The old static conditions of industry and trade 
have given way. We are in a dynamic world, where 
the old conception of any fixed ratio of earnings to 
prices of stocks as a proper ratio must yield to the 
demands of shifting scales of industrial effort. 
THe price-earnings ratio of bonded securities, of 
course, is relatively fixed for the life of each par- 
ticular bond. For bonds the term “yield” is 
synonymous with earnings, while for stocks it is not. 
Bond yields, the reciprocal of the price-to-cash- 
earnings ratio, during 1929 ranged from 3.4 per 
cent for Liberty Bonds and 4.3 per cent for munici- 
pals, to 4.7 and 4.9 per cent for rails and utility 
bonds respectively. For industrial bonds it was s.1 
per cent. The price earnings ratio for Liberty 
Bonds, for example, was 33 to 1. Leonard Ayres 
reports that during the twenty-eight years from 
1900 through 1927, the market prices of dividend 
paying industrial common stocks averaged about 
sixteen times as much as their dollar dividends; that 
during the same period the prices of a list of high-