Prosperity and Depression.pdf

Nature and Causes of the C;YclePart IIamortisation from the one side and replacement from the otherwithout running·the risk of obtaining a negative figure for investmentand consequently for demand for investible funds. Therefore,so long as we are dealing with the expansion, investmentmay be interpreted as net investment.! Ifwe adopt this procedurein order to simplify the further discussion, we have to distinguishonly two sources of supply-vi.%., saving and inflation.The statement that the supply of investible fundsSavings and which would be forthcoming at a given point ofinflation. time or during a short period of time at varioushypothetical rates ofinterest may be made up partlyby c~rrent saving and partly by inflation implies that actual investmentneed not he equal to saving. During an expansion process,the volume of investment is normally larger than the volume ofsavings, the excess being financed by inflation. In other words,demand for investible funds is so large that it cannot besatisfied by current saving, so that inflationary sources of supplyare tapped.As we have seen in Chapter 8, § 2., this convenient language,which has been used by many writers, has given rise to intricate. terminological difficulties. We need not again go over thecontroversies discussed there. Suffice it to say that the definitionofsaving to be given presently is identical with that of ProfessorROB~RTSON.s The reader who has read Chapter 8 will have no'diffic~ties in translating, if he so desires, what will be said in thefollowing pages into other terminologies-e.g., the Keynesian,which aV6ids speaking of differences between saving andinvestment..By saving we understand-as everybody does-in-SupplY come J::9inus expenditure for consumption. But itisof saving. necessary to introduce the time factor. We mustdistinguish between currently earned income, whichis simply the money value bf the net output of the economic1 This we may do, even if we refrain from giving a perfectly exactdefinition of net investment.t See, however, the slight qualification alluded to in footnote 1 onpage 293 above.