256

A TREATISE ON MONEY

BK. IV

tion, and multiplied by tbe number of years’ purchasecorresponding to tbe current rate of interest forcapital of tbe duration in question ; and where tbegoods represented by tbe securities are capable ofbeing reproduced, tbe anticipated value of tbe con-sumption-goods yielded by tbe capital-goods will beinfluenced by tbe cost of production of tbe capital-goods in question, since this affects tbe prospectivesupply of such goods.

But in tbe very short run, it depends on opinionlargely uncontrolled by any present monetary factors.A. higher value for securities is not immediatelychecked by monetary factors in tbe way that a similarenhancement of tbe prices of currently consumed goodswould be checked by lack of sufficient income topurchase them. For we have seen that tbe amountof Business-deposits B required to transact financialbusiness depends at least as much on tbe activity ofmarkets as on tbe average value of tbe instrumentstraded, and also that on account of their very highvelocity of circulation any necessary increase in themis easily supplied without much effect on tbe supply ofmoney for other purposes ; with tbe result that wecannot rely on this for a check.

Accordingly opinion has a dominating influenceon tbe position to a degree which does not apply intbe case of tbe quantity of money required to lookafter a given wages-bill. If everyone agrees thatsecurities are worth more, and if everyone is a “ bull ”in tbe sense of preferring securities at a rising priceto increasing their Savings-deposits, there is no limitto tbe rise in price of securities and no effective checkarises from a shortage of money.

Nevertheless, as soon as the price of securitieshas risen high enough, relatively to tbe short-termrate of interest, to occasion a difference of opinionas to tbe prospects, a “ bear ” position will develop,and some people will begin to increase their Savings-