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CH. 15 INDUSTRIAL & FINANCIAL CIRCULATIONS 257

deposits either out of their current savings or out oftheir current profits or by selling securities previouslyheld. Thus in proportion as the prevailing opinioncomes to seem unreasonable to more cautious people,the “ other view ” will tend to develop, with theresult of an increase in the “ bear ” position—whichdoes bring into existence a monetary factor, thoughone which is corrective only in a “ bull ” market—as described above.

Finally, if the value of existing securities of akind which are capable of being reproduced comes todiffer from the current cost of production, this will, bystimulating or retarding new investment, bring intooperation certain other monetary factors in a mannerto be elaborated in subsequent chapters.

I should say, therefore, that a Currency Authorityhas no direct concern with the level of value of existingsecurities, as determined by opinion, but that it has animportant indirect concern if the level of value of ex-isting securities is calculated to stimulate new invest-ment to outrun saving, or contrariwise. For example, aboom in land values or a revaluation of the equities ofmonopolies, entirely dissociated from any excessivestimulus to new investment, should not divert aCurrency Authority from keeping the terms of lendingand the total supply of money at such a level as toleave over, after satisfying the Financial Circulation, theoptimum amount for the Industrial Circulation (so faras this is compatible with the preservation of externalequilibrium where our system is not a closed one).The main criterion for interference with a “ bull ” ora“ bear ” financial market should be, that is to say, theprobable reactions of this financial situation on theprospective equilibrium between savings and newinvestment.

VOL. i