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A TREATISE ON MONEY

BK. IV

In modern conditions, both in Great Britain andin the United States , the total “ bear ” positioncan, of course, much exceed the amount of Savings-deposits B, since professional investors have other,and generally more profitable, means of lending“ bear ” funds against liquid claims on cash thanthrough the Banking System , e.g. by buying TreasuryBills and by direct loans to the Money Market andthe Stock Exchange ; and in addition there are thosetransactions of bears who have sold what they do notown, which are directly offset against the transactionsof bulls who “ carry-over ” what they have bought.Nevertheless the fluctuations in the amount of Savings-deposits B—including in this fluctuations in the de-posits of industrial firms which are carrying less ormore working capital than usual on account of a dis-trust of or confidence in the prospects, and also of thedeposits of institutions which have thought it wise totake advantage of “ bull ” activity to raise funds bythe sale of securities, new or old, in advance of theiractual needs—are capable of being important. Thusthe fluctuations in Savings-deposits B are probablythe most important element of variability in thedemand for money due to Finance.

The total amount of the Financial Circulationdepends, therefore, partly on the activity of transac-tions but mainly on the magnitude of the “ bear ”position—-both of these things being likely to be phe-nomena of rapidly changing prices rather than of anabsolutely high or low level.

Now, whilst a tendency of the Savings-deposits(M 3 ) to increase or decrease is an indication of anincrease or decrease of the “ bear ” position, thereare altogether four possible types of speculativemarkets :

(i.) A “ bull ” market with a consensus of opinion,i.e. security-prices rising but insufficiently so that