ABSTRACT

General trade depression in the making It is evident that the general rate of production cannot for long exceed the general rate at which goods and services are being bought by consumers and investors; that, although excessive abstention from the buying of goods and services with income by some may for a time be neutralized by increased buying of goods and services on the part of those who are able and willing to borrow money for this purpose, there is a limit to the quantity of money that can be lent safely and profi tably to fi nance either consumption or production; and that when this limit is reached the buying of borrowers and debtors must be decreased, causing lower prices, trade depression, fi nancial losses all round, decreased buying by the creditors and aggravation of the buying defi ciency. Thus, to the extent that the general rate of buying is inadequate, the general rate of production is retarded; and to the extent that the amount of buying by those using loans intermittently decreases and fails to neutralize the absence of adequate buying by those using their own money, the general rate of buying and the general rate of production are intermittently retarded. Hence, the intermittent presence of acute trade depression. We propose to show: (1) that the amount of money furnished to willing buyers by means of international loans has been excessive in relation to the growth of the imports of the creditor countries; (2) that the amount of money furnished to willing buyers by means of stock exchange loans (i.e., the amount of money lent to stock exchange operators, converted into stock exchange profi ts by them and used for the buying of goods and services), has been excessive in relation to the long term profi ts of industry; (3) that the amount of money furnished to willing buyers by means of loans on the hire-purchase system has been excessive in relation to the growth of wages in the creditor countries; (4) that in spite of all this buying with borrowed money, the total amount of buying has not been excessive; (5) that the end of the excessive fi nancing of buyers with loans has disclosed a defi ciency of buying of goods and services by the lenders or by creditor countries and creditors in general; (6)2 that this defi ciency of buying of goods and services by the creditor countries has been partly due to excessive withdrawals of money by taxation from the public in these countries for the purpose of over-rapid reduction of their national debts; (7) that the confl ict between, on the one hand,

honourable debtors to repay their debts, and on the other, creditors or investors to increase their bondholdings, has been the main cause of insuffi cient buying and trade depression; (8) that the declining birth rates in the creditor countries has increased the diffi culties of an economic system in which the necessary amount of marketing is only maintained by the excessive piling up of debts; (9) that the unstable nature of this economic and fi nancial structure has been demonstrated by the effect of the breach made in it by the impending collapse in wholesale prices; and (10) that, in effect, less should have been lent and more should have been bought by the creditors. We, therefore, conclude that there is a minimum as well as a maximum to the quantity of net money income that should be received by willing buyers, and that when this minimum is not reached-and it will not be reached when potential buyers are unwilling to buy adequately and to maintain adequately the profi ts and wages of producers and workers-it must be attained by the intervention of governments with appropriate measures.