24 Minnie Throop England 



absolute amount of loan accommodations being given by the banks 

 keeps on increasing. The reason is that the falling off in the de- 

 mand for credit for the purchase of goods is more than balanced 

 by the demand for credit to be used in speculation. The kind of 

 speculation here referred to makes large demands upon the guar- 

 anteeing power of the banks, but creates little demand for goods. 

 For example, the formation of trusts involves large underwriting 

 schemes, but does not necessarily mean enlarged plants or in- 

 creased production accompanied by a greater demand for raw 

 materials. The order of decline is commodity prices, stock ex- 

 change prices, loans. 



The fail in prices is, therefore, due first to the decline in the 

 subjective value of goods, shown by a lessened desire to oft'er 

 credit for goods. This causes a slight and very gradual fall of 

 prices. After the lower subjective value of goods has been reg- 

 istered on the stock exchange by a fall in stock prices, the fall of 

 commodity prices is very greatly accelerated because the ability 

 to secure loans, even in the case of those who desire to increase 

 their purchasing power in order to secure goods, has been re- 

 duced through the shrinkage of collateral. 



Ill 



AN ANALYSIS OF THE MOVEMENT OF COMMODITY PRICES 



An investigation of prices would not be complete which did 

 not show just how commodity prices as a whole and different 

 classes of commodity prices are affected by the expansion and 

 contraction of credit. 



AN ANALYSIS OF GENERAL PRICES 



There are many questions that may be asked concerning prices. 

 Is their movement regular? That is, do prices rise continuously 

 until they reach a maximum point and then fall until they reach 

 the minimum? This query is, on the whole, answerable in the 

 affirmative. Any deviations from this rule are apt to be slight 

 and unimportant. The most notable exceptions occur immedi- 



64 



