•• Viiii

m

»W|!’ ^sp^wy*?

CH. 18 CHANGES DUE TO INVESTMENT FACTORS 287

change suddenly as are those which determine thevolume of investment. If, however, saving does falloff for any reason, this will mean a larger expenditureon the same available consumption-goods as before, sothat, as in the other cases, prices move upward. Noris there any theoretical reason why a Credit Cycleshould not start with a downward phase, due to In-vestment falling off whilst Saving keeps up. Thismight result from some blow to the confidence ofentrepreneurs in particular types of enterprise, or bya Capital Deflation which left unaffected the readi-ness of the public to save. Most often of all, perhaps,an upward phase is brought about as a reaction froma previous downward phase and a downward phase asa reaction from a previous upward phase, boom suc-ceeding slump and slump succeeding boom ; thoughthe precise date at which the reaction commences willbe usually determined by some independent changein the environment due to non-monetary factors.

B. The Secondary Phase

The price-movements so far considered belong tothe Primary Phase of the Credit Cycle. They arebrought about, not as the result of attempts to takeadvantage of the occurrence of profits, but becauseentrepreneurs see advantageous opportunities for in-creased activity in particular directions. The Second-ary Phase, however, is of a different character. Wehave emphasised the point that it is of the essence of aCommodity Inflation that prices rise out of proportionto the increase, if any, in the costs of production.Consequently those entrepreneurs who have liquidconsumption - goods emerging from the process ofproduction are able to sell them for more than theyhave cost, or are costing, to produce, and so to reap awindfall profit. The high prices also act as an in-ducement to retailers and wholesalers to reduce their