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ASPECTS OF THE CREDIT CYCLE

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of production to adjust the degree of their effort tothe degree of its reward with a closer approximationto maximum advantage than under a regime ofstability. But even if this could be established inspecial cases—and many conditions have to be ful-filled for this—there remains the question of whatgeneral rule is best.

I conclude, therefore, that Mr. Bobertson’s con-tentions, though they deserve serious attention, arenot sufficient to dispose of the primafacie presumptionin favour of aiming at the stability of purchasingpower as a general rule, in preference to the oscillationsof the Credit Cycle. But the reader must please noteemphatically that throughout this chapter I am deal-ing solely with a Commodity Inflation which is part ofa Credit Cycle, i.e. an Inflation which is due to Invest-ment Factors, unaccompanied by any lasting changein Monetary Factors. A prolonged Commodity In-flation due to progressive increases in the supply ofmoney, as contrasted with a prolonged CommodityDeflation, is quite another thing—as we shall see inVol. ii. Chap. 30—and may be a most potent instru-ment for the increase of accumulated wealth.

In any case the conclusion holds good that anexpansion of the volume of investment, resulting inrising prices, may be extremely advisable as a generalrule, when it is a corrective to a pre-existing Com-modity Deflation. In this case the rising prices aretending to bring the price-level back again to equi-librium with the existing level of incomes. When, forexample, a condition of widespread unemploymentexists as the result of the downward phase of a CreditCycle, but without the Commodity Deflation havingpassed over into an Income Deflation, it will be im-practicable to bring about a recovery to a normallevel of production and employment without allowingsome measure of expansion and of rising prices asa corrective to the existing Deflation. This is not