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A TREATISE ON MONEY

BK. IV

of securities than they can carry with their ownresources.

These Savings-deposits fall into two categories.They include, as a rule, a substantial stable sub-stratum of Savings-deposits which are not held becausethe holder of them takes a view adverse to the pros-pects of the money-value of securities, but for one orother of the personal reasons enumerated in Chapter3 ;—there are owners of wealth, that is to say, whopermanently prefer to hold Savings-deposits in prefer-ence to securities. Since, however, the amount of thiskind of Savings-deposits is likely to change slowly, anyrapid change in the total of the Savings-deposits is aptto indicate that there is a change in the second category.

Let us call the two categories of Savings-deposits Aand B respectively.

The second category of Savings-deposits com-prise what, in language borrowed from the StockExchange , we will call the “ bear ” position,—in-cluding, however, as bears not only those who havesold securities “ short ”, i.e. have sold securitieswhich they do not own, but also those who wouldnormally be holders of securities but prefer for thetime being to hold liquid claims on cash in the formof Savings-deposits. A “ bear ”, that is to say, is onewho prefers at the moment to avoid securities andlend cash, and correspondingly a “ bull ” is one whoprefers to hold securities and borrow cash—the formeranticipating that securities will fall in cash-value andthe latter that they will rise.

Now when bullish sentiment is on the increase,there will be a tendency for the savings-deposits tofall. The amount of this fall will depend upon howcompletely the rise in security-prices relatively tothe short-term rates of interest offsets the bullishnessof sentiment. There will be a level of security-prices which on the average of opinion just balancesthe bullishness, so that the volume of savings-deposits