oh. 17 CHANGES DUE TO MONETARY FACTORS 267

rowed money. This will raise the price of securities,and the boom in securities thus brought about willprobably increase the Stock Exchange turnover. Thusa part, but usually a very small part, of the new moneywill have to be retained in the Business-deposits B tolook after the increased money-turnover of securities.Now for every buyer of a security (or commodity) theremust be a seller. The seller may use the proceeds tobuy some other security, in which case the rise in priceof securities will spread from one category to another.But as the price of securities continues to rise, one orother of two things must, sooner or later, happen. Itmay be that this price-rise will furnish windfall profitsto the producers of new investments, with the resultthat, via the new issue market or otherwise, increasedfunds will reach the hands of entrepreneurs for thepurpose of increasing, or endeavouring to increase, theoutput of investments. The further course of eventswill then be the same as in the case already considered.

The other alternative is that, the rising pricesof securities will cause a difference of opinion todevelop between two sections of the financial com-munity,—one section (the “ bulls ”) believing in thecontinuance of the price-rise and willing to buywith borrowed money, the other section (the “ bears ”)doubting the continuance and preferring to sell securi-ties for cash or bills or other liquid assets. Or, in sofar as the banks are themselves buying securities, itwill be sufficient if a “bear” position develops. Nowin so far as the bears’ funds are lent to the bulls other-wise than through the Banking System, the StockExchange boom can continue with the aid not onlyof the new money but also of the proceeds of thebears’ sales. But in so far as the bears add theproceeds of their sales (or of their refraining frombuying securities with their current savings) to theSavings-deposits, this uses up part of the new moneyin appropriately increasing M 3 .