CH. IO

THE FUNDAMENTAL EQUATIONS

145

Nevertheless, although these factors react on oneanother, the excess-saving factor and the excess-bearish factor 1 (as perhaps we may call them) areindependent in the sense that any degree, positive ornegative, of the one is compatible in appropriateattendant circu m stances with any degree, positive ornegative, of the other.

Before leaving this section it may be well to illus-trate further the conclusion stated above, that a fallin the price of consumption-goods due to an excess ofsaving over investment does not in itself—if it isunaccompanied by any change in the bearishness orbullishness of the public or in the volume of savings-deposits, or if there are compensating changes in thesetwo factors—require any opposite change in the priceof new investment-goods. For I believe that this con-clusion maybe accepted by some readers with difficulty.

It follows from the fact that, on the aboveassumptions, the total value of the investment-goods(new and old) coming on to the market for purchaseout of current savings is always exactly equal to theamount of such savings and is irrespective of thecurrent output of new investment-goods. For if thevalue of the new investment-goods is less than thevolume of current savings, entrepreneurs as a wholemust be making losses exactly equal to the difference.These losses, which represent a failure to receive cashup to expectations from sales of current output, mustbe financed, and the non-receipt of the expected cashreceipts must be somehow made good. The entre-preneurs can only make them good either by reducingtheir own bank-deposits or by selling some of theirother capital assets. The bank-deposits thus releasedand the securities thus sold are available for, andare exactly equal to, the excess of current savingsover the value of new investment.

1 I.e. bearishness on the part of members of the public which is notbalanced by increased credit creation by the banking system.

VOL. I

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