[발췌 15장: Keynes's Treatise on Money] #15. The Industrial Circulation and the Financial Circulation

출처: J. M. Keynes, A Treatise on Money (October 31, 1930)
자료: http://catalog.hathitrust.org/Record/007150328 ; 차례


※ 발췌 / excerpts of which:  Book Ⅳ, The Dynamics of the Price-Level,

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Chapter 15. The Industrial Circulation and the Financial Circulation

(1) Industry and Finance Distinguished and Defined    (p. 243)

We must now devote ourselves to the analysis of the factors which tend to bring changes in the value of money and to their mode of operation.

  For this purpose it is necessary to make yet a further classification cutting, to a certain extent, across our division of the total quantity of money (in Chapter 3) into the Income-deposits, the Business-deposits and the Savings-deposits,ㅡnamely a division between the deposits used for the purposes of industry, which we shall call the ^Industrial Circulation^, and those used for the purposes of Finance, which we shall call the ^Financial Circulation^.

  For ^Industry^ we man the business of maintaining the normal process of current output, distribution and exchange and paying the factors of production their incomes for the various duties which they perform from the first beginning of production to the final satisfaction of the consumer. By ^Finance^, on the other hand, we mean the business of holding and exchanging existing titles to wealth (other than exchanges resulting from the specialisation of industry), including Stock Exchange and Money Market Transactions, speculation and the process of conveying current savings and profits into the hands of entrepreneurs.

  Each of these two branches of Business utilises a certain part of the total stock of money. Broadly speaking, Industry requires the use of the Income-deposits and a part of the Business-deposits, which we will call Business-deposits A ; whilst Finance requires the uses of the Savings-deposits and of the remainder of the Business-deposits, which we will call Business-deposits B. Thus the sum of the two former is the Industrial Circulation and the sum of the two latter the Financial Circulation. Since we shall argue that the ^absolute^ variability of the Business-deposits B is, as a rule, only a small proportion of the total quantity of money, this being a consequence of their very high velocity, changes in the Cash-deposits (i.e. Income-deposits ^plus^ Business-deposits) are generally a good index of changes in the Industrial Circulation; and, similarly, changes in the Savings-deposits of changes in the Financial Circulationㅡwhich fortunately brings us back to classes of deposits of the magnitude of which we have in practice moderately good statistical indications.


(2) Factors Determining the Volume of the Industrial Circulation   (p. 244)

Since M1.V1＝E, the amount of money M1 required for the Income-deposits depends partly on E, the volume of income, and partly on V1, the velocity of the Income-deposits; and since E＝W1.O, E depends on W1, the money-rate of efficiency-earnings, and O, the volume of output. The causes which determine the variability of V1 we shall consider in detail in Vol. II Chapter 24.

  As regards the Business-deposits A, it is evident in the first place that the volume of a part of them tends to move much in the same way as that of the Income-deposits. For the Income-deposits are constantly flowing into the Business-deposits through purchases of goods and out again through payment of wages. Those parts of the Business-deposits which represent the proceeds of sales to consumers and the remuneration of the factors of production must, therefore, bear the same proportion to the Income-deposits as the velocity of the latter (V1) bears to that of the former (V2), so that the two fluctuate together so long as the ratio of their velocities is unchanged.

  In the second place, the prices of unfinished goods (i.e. of working capital) will in conditions of equilibrium reflect the prices of finished goods. Further, the costs of production, and therefore the prices, of fixed capital goods will, in equilibrium, also move with the money-rate of efficiency-earnings in the same way as the prices of other goods. Moreover, the relation between the volume of these transactions and the volume of output will be much the same as in the case of the Income-deposits. Thus the quantity of that part of the Business-deposits which is required for the exchange of unfinished goods and of newly finished fixed capital-goods between entrepreneurs will also tend in these conditions to vary in the same proportion as do the Income-deposits.

  But there remain certain reasons why the amount of the Business-deposits A can vary differently from that of the Income-deposits, namely:

  (a) The comparative importance of different articles for the Income-deposits and the Business-deposits respectively varies considerablyㅡi.e. they are differently "weighted"; so that changes in ^relative^ prices are liable to upset the ratio between the two classes of deposits. For the same reason the ratio may be upset by a change in the ^character^ of production.

  (b) An assumption of stability in the ratio between the velocities of the Income-deposits and of the Business-deposits A respectively is not reliable. The latter is not tied down to a measure of stability, as the former is, by the regularity in the dates of payment which generally characterises the disbursement of wages and salaries.

  The evidence, which we shall consider in Chapter 24, indicates that V2, the velocity of the Business-deposits as a whole, is highly variable. Although this variability may often be due, in major part, not to changes in the velocities of Business-deposits A and of Business-deposits B, but to the changes in the proportionate distribution of the total Business-deposits between A and B, nevertheless there can be no doubt that there are also short-period fluctuations of some magnitude in the velocity of the Business-deposits due to variations in the amount of sacrifice involved in holding balances, as well as to other causes. For when business is active and the cost of borrowing high, firms will tend to economise in the amount of Business-deposits A which they keep. Moreover, when real-incomes are falling through a decline in employment, the public may endeavour for a time to maintain their standard of life by reducing their Income-deposits, thus increasing the velocity V1 at a time when V2 is likely to be decreasing; though apart from changes due to a distrust of the currency, which can, as we know, be catastrophic, I incline to the opinion that the short-period fluctuations of V1 are inconsiderable.[1 (p. 246)] In any case, V1 and V2 may show different trends over long periods, due to progressive changes in business habits or in the character of production.

  (c) Thirdly, the Business-deposits A and the Price-level appropriate to them may be influenced by the emergence of Profit or Loss, which, in some circumstances, can affect price-levels and the requirements of the monetary circulation out of proportion to the change, if any, in the volume of the Income-deposits.

  Nevertheless, the requirements of the monetary circulation will be much less affected by a given change of price arsing in this way than by an equal change due to a rise in the rate of efficiency-earnings. This is particularly the case where the profits are emerging in respect of a rise in the price of working capital which has not yet communicated itself to finished consumption-goods. We can conveniently call this state of affairs ^Commodity Speculation^, meaning by this movements in the prices of goods in process of production which are not yet reflected in the purchasing power of money. For fluctuation in the price of Working Capital, of which the index-number of raw materials at wholesale may be taken as fairly representative, may be supported by expectations as to the prices which will be obtained on the re-sale of the gods at a subsequent date either in the same or in a more finished form. Thus for a time, the length of which will be determined by the duration of productive processes and the cost of carrying stocks, the rise in the wholesale standard can be sustained without a corresponding rise in the consumption standard.

  It follows that a speculative rise in the wholesale standard, is particularly unlikely to be held back by a shortage in the quantity of money. Moreover, there is a further time-lag between the price-rise and the demand for money, in that the current price-quotations reflect the prices at which contracts for future completion are now being entered into; so that it is not until the date of completion that the higher prices will call for increased Business-deposits. If, indeed, the speculative movement is not supported in due course by a rise in the consumption standard, it is not likely to survive long. For in this case the expectations on which it was based will have been disappointed. Nevertheless the time which elapses before the reaction may be quite substantial; and during this interval the movements of the wholesale standard and of that part of the Business-deposits which relate to transactions in working capital will be more or less divorced not only from those of the Income-deposits but also from those of the consumption standard.

  For these various reasons the changes in the volume of the Industrial Circulation as a whole will not correspond accurately to changes in the volume of the Income-deposits. Nevertheless, in the main the volume of the Industrial Circulationㅡthough it is also influenced to a certain extent by changes in the character of production, in the habits of the public and of the business world, and in the sacrifice involved in keeping resources in the form of moneyㅡwill vary with E, the aggregate of money incomes, i.e. with the volume and cost of production of current output.


(3) Factors Determining the Volume of the Financial Circulation   (p. 248)

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