lo Minnie TJiroop England 



forms. It may arise from a good crop; farmers will then have a 

 larger amount of goods to exchange for other kinds of goods, 

 and the factory managers wish to increase their output to meet 

 the new demand. The belief that prosperity is returning may 

 come from the fact that the government has decided to undertake 

 some large enterprise, as canal construction, enlargement of the 

 navy, etc. Whatever the form, any enterprise that calls for in- 

 creased quantities of goods involves necessarily increased employ- 

 ment for the department of industry that furnishes that particu- 

 lar line of goods. 



The belief that the rate of production in the immediate future 

 will be high makes men willing to give their notes in exchange 

 for goods already produced and offered on the market, and it 

 also makes men willing to part with their goods in exchange for 

 such notes. For what is a note but a promise that one will, in 

 the meantime, before the note falls due, produce enough goods 

 to replace with interest the goods which have been advanced by 

 another? Whatever, then, the cause of the belief that times are 

 going to be prosperous, the result is the same : goods begin to 

 change' hands, and the exchanges are made possible by the ac- 

 ceptance of the promissory notes. The banks come into use at 

 once by discounting the notes as presented to them, thus giving 

 the holders of the notes an immediate purchasing power. The 

 faith in good times ahead, therefore, is at once evidenced by an 

 increase in the loans and discounts of the banks. 



There is, how^ever, another and most important link in the 

 chain of events. It is connected with the stock exchange. Just 

 as soon as the belief arises that business is going to pick up. at- 

 tention is at once directed to the shares of those companies which 

 it is expected will receive the benefit of the anticipated larger 

 orders or higher prices. The greater earning power of these 

 companies will mean ultimately higher dividends, so that at once 

 the shares of those companies have an increased subjective value. 

 The increased subjective value is immediately registered as a 

 higher market value, because either shares will be held back 

 from the market, or buyers will be more anxious to secure them, 

 and a larger proportion of the. purchasing power of the commu- 

 nitv will be offered for them. 



,SO 



