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Minnie Tliroop England. 



both quantity and price of goods produced. In other words, some 

 industries have failed to produce as many goods as expected, and 

 others have produced as many or more, but it has resulted in 

 overproduction of that particular line of goods with its accom- 

 panying low prices. "It is the fact that the great productive or- 

 ganizations have promised more than they can carry out in the 

 way of returns to investment which is the great cause of crises."^ 

 The decreased subjective value of all goods is at once shown by 

 a rclatiz'c decrease in the demand for credit with which to buy 

 the goods on the market, and their price falls. The principle in- 

 volved is the same as in the other cases just considered: a con- 

 traction of credit and a fall in prices. But in the crisis of 1866, 

 the actual contraction of loans does not take place until prices 

 have fallen. The explanation is as follows : 



(i) The number of transactions at a lower price may be so 

 much greater that it may require a larger amount of credit to 

 carry on business than before. The loans of the banks, therefore, 

 continue to increase. This phenomenon occurs frequently on the 

 stock market. There will be a fall in prices, yet a larger sale of 

 shares, so that the total turnover is greater than when prices were 

 higher. In verification of this, the following statistics are 

 ofifered : 



Table XIV 

 JVew York Slock Exchange 



It will be seen that in 1889, 1890, and 1891 as compared with 1 

 the sales of shares were larger but the average prices were lower 

 The same is true of 1904 as compared with 1903. 



'Taylor, W. G. L. Kinetic Theory of Economic Crises. Univ. Stud. 

 4:68, January, 1904. 



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