Prosperity and Depression.pdf

Nature and Causes of the CyclePart IIThe downward movement may then be easily reversed by any suchfavourable stimulus affecting a particular industry as is bound tooccur from time to time. The same stimuli· will not so easilystart an upward movement) if they occur at an earlier moment)when the contraction has not yet spent its force.Besides thus paving the way for the expansionary influence ofsome chance event, the contraction is also likely itself to give riseto inflationary stimuli. We shall see that it is sometimes difficultto draw the line between the two types of stimulating shock : thatis to say) it is not always easy to decide whether a certain event,which actually played the role of the starter for an expansion,would have arisen in .the absence of the previous contract.on.Neither the validity, however, nor the usefulness of our distinctionis destroyed by the existence of doubtful cases.§ 7. THE PROXIMATE CAUSES OF REVIVALAn expansion can always be stopped and aAsymmetfJ' contraction process started by a restriction of creditbetween by the banks. A contraction, however~ cannotturning-points. always be ended promptly merely by making creditcheap and plentiful. There will always be a rate ofinterest high enough to discourage even the most eager borrower;but, when prices and demand are falling and are expected tofall further, the demand for investible funds may be at so low anebb that there is no rate (short ofa negative figure) which will leadto a revival of investment and entail an increase in the effectivecirculation of money-that is, in the total demand for goods interms ofmoney per unit oftime. There is thus a certain asymmetrybetween the upper and the lower turning-points which necessi·tates some departures in the· method of exposition from thatadopted in the corresponding section on the down-tum.We shall now attempt to set out the variousProducers'spending.possibilities and factors involved in an orderly andsystematic fashion on the basis of our demand-andsupplyschema for investible funds.An expansion can be brought about by an increase in the expenditures.eitherofproducers or ofconsumers. In the further course