Iniiuence of Credit on Prices 



21 



(2) There may have been an absokite decrease in the amount 

 of loan credit offered for commodity goods, even although the 

 loans of the banks were increasing because a growing proportion 

 of the loan credit being given was used, not to purchase goods in 

 the commodity market, but for speculative purposes on the stock 

 exchange. 



In support of the second proposition, two charts are oft'ered 

 showing the amount and proportion respectively of clearings at 

 the London Bankers' clearing house on stock exchange settle- 

 ment days and 4ths of the month. The amount of clearings on 

 stock exchange settlement days is an index of the amount of 

 speculation in progress. The clearings on the 4ths of the month 

 may be taken as representative of business conditions because 

 trade bills are usually made out to fall due the first day of the 

 month, and this, with the custom of adding three days of grace, 

 causes these bills to be cleared on the 4th.^ The following table 

 is compiled from chart I: 



In each case of the four given, clearings on 4ths of month be- 

 gin to decrease at the same time with, or prior to, the decline of 



^Beginning with an analysis of chart I, it is found that the general 

 movements of business and speculation (using "business" in the sense of 

 trade bill clearing and "speculation" for stock exchange clearings) are 

 very similar. Both increase during prosperous years and fall ofif during 

 the years of depression. Stock exchange clearings fluctuate more than the 

 trade bill clearings; they rise proportionately higher in good times and 

 fall proportionately lower in bad times. The highest points and lowest 

 points of stock exchange clearings do not always correspond to the high- 

 est and lowest points of the trade bill clearings. Following the crisis of 



61 



