2013년 6월 19일 수요일

[발췌 19장: Keynes's Treatise on Money] #19. Some Special Aspects of the Credit Cycle

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 19. Some Special Aspects of the Credit Cycle

(1) The "Justification" of Commodity Inflation (p. 293)

The experiences of the post-war period led many of us to advocate stability of the price-level as the best possible objective of practical policy. Amongst other things, this would mean an attempt on the part of the banking authorities to eliminate the Credit Cycle at all costs. This advocacy has led to criticism, of which Mr. D. H. Robertson (in his ^Banking Policy and the Price Level) is the main author, to the effect that the Credit Cycle, though guilty of disastrous excesses and grave crimes, has a part to play in a progressive society, and that an attempt to check it altogether might produce stagnation as well as stability. It may be convenient, therefore, to examine at this point how much force there is in Mr. Robertson's contentions.

  The main basis of Mr. Robertson's argument is that the Commodity Inflation phase of a Credit Cycle, so long as it lasts, causes the wealth of the community to increase faster than would otherwise be the case. This is undoubtedly true. The result of Commodity Inflation is to cause the current output of the community to exceed its current consumption to a greater extent than would be the case otherwise; whilst, on the other hand, the higher real wages which are enjoyed during a slump are at the expense of normal capital accumulation. The amount of the excess due to a Commodity Inflation over the increment of accumulated wealth represented by voluntary savings, Mr. Robertson calls "imposed lacking", and he contends that there are occasions when it is desirable that the rate of increment of accumulated wealth should be greater than could be the case under a regime of voluntary saving unsupplemented by "imposed lacking".

  It should be noticed that the Commodity Inflation phase of a Credit Cycle cannot be of use for continuously raising the rate of wealth-accumulation. It is only useful for the purpose of producing a short, sudden spurt. Now it is quite conceivable that occasions may arise when a spurt of this character may be acutely needed. Commodity Inflation may be the most effective means of rapid transition in any case in which we have good reasons to be in a hurry. But I find it difficult to think of good examples,ㅡexcept, of course, War, when the financial purist may find himself overwhelmed before his own more slow-moving devices have had time to produce their effect.

  We must, therefore, set on the other side the losses to wealth-accumulation due to the Deflation phase of the Credit Cycle. And is it certain, when this has been done, on which side the balance lies? It may be likely the case that during the 19th century the greatly increased wealth of the world was predominantly accumulated by Commodity Inflation; but this may have due to the increasing abundance of money and at the same time the increasing efficiency of the factors of production which allowed a prolonged moderate excess of prices over efficiency-earnings, so that profits emerged and wealth was built up, rather than to the sharp oscillations of the Credit Cycle which were superimposed on this general trend. For there are enormous losses to be put on the other side ascribable to the cyclical Deflations. The loss during the latter arises not only out of consumption at the expense of savings but also out of loss of output due to involuntary unemployment (which is a greater evil than the overtime of the booms is a benefit). Not nearly enough weight is generally given to this great loss of wealth during a Deflation ascribable partly to the loss of savings and partly to the involuntary idleness of the factors of production. A policy of monetary management which engineered a Commodity Inflation from time to time when it seemed that voluntary savings were insufficient, without ever allowing the reaction of a Deflation to follow, might indeed do good. But this would not be a Cyclical Inflation. If we are to have general rules relating to Credit Cycles, it seems unlikely that a general rule in their favour would be advantageous on balance.

  Secondly, some weight must be given to considerations of social justice. In a Commodity Inflation the earnings of the factors of production are worth less than what they are producing, and the difference is arbitrarily distributed amongst the members of the entrepreneur class as a permanent addition to the latter's wealth; for they can usually secure more of the gains of the Inflation than they suffer of the losses of the Deflation. This forced and arbitrary transference of the ownership of the results of effort is in itself a considerable evil.

  There are, however, certain arguments which can be used to support Mr. Robertson's general position as follows:

 (ⅰ) In a progressive society, and indeed in a society which is subject to change of any kind, the instrument of temporary inflation may sometimes be a necessary one to secure the change-over from one-type of production to another with the desirable degree of rapidity. In a Socialist system which was directed with perfect knowledge and wisdom, the diversion of productive resources could be effected by ^fiat^. But in an individualist system this is not possible. Resources will tend to remain where they are. It will require not merely the expectation of higher profits elsewhere to move them, but the pinch of lower profits and even the threat of bankruptcy unless they move. It follows that the new men will not easily get hold of the resources, necessary to enable them to put their ideas into practice as soon as they should in the social interest, if they have to wait until the established entrepreneurs now controlling them voluntarily relinquish them in their favour. It is better thereforeㅡso the argument runsㅡthat the new borrowers should at times be given an opportunity of resources by an act of Commodity Inflation, or enabled to bid against the established firms by an act of Income Inflation, if progress is to proceed at its proper pace. We must concede real force to this. It is a by-product of strenuous times, and indeed of misfortunes generally, that the new men and methods rise more rapidly to the top than in eras of placid prosperity. But, obviously, it is a question of balancing advantages and of price to be paid. Moreover, the usual ups and down of individual industries will often provide quite an adequate stimulus without its being necessary to engineer the ^general^ disturbances which we are now discussing. Currency stability does not mean universal quiescence and a prevailing atmosphere of no change. The ^average^ stability at which it aims is one in which the losses of entrepreneurs in one direction are approximately balanced by the gains of this class in another direction, so that there is no general tendency to boom or slump super-imposed on the progress or decline of particular industries and particular entrepreneurs. It is not one in which the Survival of the Fittest by the operation of profit and loss has been suspended.

  (ⅱ) Mr. Robertson contends that in certain circumstances changes in the general price-level, as distinct from particular price-changes, will enable the factors of production to adjust the degree of their effort to the degree of its reward with a closer approximation to maximum advantage than under a regime of stability. But even if this could be established in special casesㅡand many conditions have to be fulfilled for thisㅡthere remains the question of what ^general rule^ is best.

  I conclude, therefore, that Mr. Robertson's contentions, though they deserve serious attention, are not sufficient to dispose of the ^prima facie^ presumption in favour of aiming at the stability of purchasing power as a general rule, in preference to the oscillations of the Credit Cycle. But the reader must please note emphatically that throughout this chapter I am dealing solely with a Commodity Inflation ^which is part of a Credit Cycle^, i.e. an Inflation which is due to Investment Factors, unaccompanied by any lasting change in Monetary Factors. A prolonged Commodity Inflation due to progressive increases in the supply of money, as contrasted with a prolonged Commodity Deflation, is quite another thingㅡas we shall see in Vol. II Chap. 30ㅡand may be a most potent instrument for the increase of accumulated wealth.

  In any case the conclusion holds good that an expansion of the volume of investment, resulting in rising prices, may be extremely advisable as a general rule, when it is a corrective to a pre-existing Commodity Deflation. In this case the rising prices are tending to bring the price-level back again to equilibrium with the existing level of incomes. When, for example, a condition of widespread unemployment exists as the result of the downward phase of a Credit Cycle, but without the Commodity Deflation having passed over into an Income Deflation, it will be impracticable to bring abut a recovery to a normal level of production and employment without allowing some measure of expansion and of rising prices as a corrective to the existing Deflation. This is not true of an Income Deflation, provided its incidence has been fairly equal on all the factors of production. But it is true of a Commodity Deflation. In short, to stabilise prices at the bottom of a Commodity Deflation would be a stupid thing to do. But with this all "stabilisers" would agree.

  There is one other general conclusion which legitimately emerges from this discussion, namely that the principal evils of a Credit Cycle are due to its Deflation phase and not to its Inflation phase. Thus real advantages may ensue if, when a Commodity Inflation has passed over into an Income Inflation, no attempt is made to go back to the old state of affairs but stability is preserved at the new level of incomes. The state of affairs in which the supply of money allows the equilibrium price-level to rise over the long period a little faster than efficiency-earnings, so that there is a progressive moderate bias in favour of Commodity Inflation, is, therefore, vastly preferable to one in which the price-level is slowly falling relatively to earnings. The advantages to economic progress and the accumulation of wealth will outweigh the element of social injustice, especially if the latter can be taken into account, and partially remedied, by the general system of taxation;ㅡand even without this remedy, if the community starts from a low level of wealth and is greatly in need of a rapid accumulation of capital.

(2) The Incidence of Commodity-Inflation   (p. 298)

A Commodity Inflation really does increase the resources available for new investment and serves to augment Society's stock of wealth. This respect, in which it totally differs from an Income Inflation and from a Capital Inflation which do no such thing, has been commonly overlooked by those who do not distinguish different kinds of Inflation from one another.

  Bit it alsoㅡand in this respect it resembles Income Inflationㅡcauses a redistribution of existing wealth by transferring wealth from owners of money and debts to those who have borrowed and have liabilities expressed in terms of money. For not only do those in the possession of money-incomes find that their real incomes are diminished; those who are in possession of a stock of money also discover that this stock has less than its previous real value. Mr. Robertson has argued from this that the latter class may, therefore, be induced to save on a greater scale than they would otherwise, in order to make good the loss which they have involuntarily suffered in the value of their stock of money. In addition those in receipt of increased incomes, whether as a result of increased employment or of higher money-rate of efficiency earnings, may be expected to save part of their incomes to build up their income-deposits.

  To savings arising in the former way, i.e. to replenish income-deposits, Mr. Robertson has given the name of "induced lacking", as distinct from the "imposed lacking" (as he calls it) resulting from the reduction in the purchasing power of current money incomes which is caused by Commodity Inflation.

  But there is something further to be said about the distinction between these two things. Mr. Robertson's "imposed lacking" is solely a characteristic of Commodity Inflation and is not present in the case of an Income Inflation; whereas his "induced lacking" is primarily a characteristic of an Income Inflation, and is only present in the case of Commodity Inflation when the latter is accompanied by an increase of output. For there is no reason to expect any increase in the Income Deposits except in proportion to the increase of money-earnings. Furthermore, whilst "imposed lacking" ^necessarily^ represents an augmentation of the resources available for new investment, this is only true of "induced lacking" when this results from genuine savings. Yet there are other ways of augmenting the Income Deposits,ㅡfor example, by a transfer from the Savings Deposits or by refraining from the purchases of securities with normal current savings; or the velocity of the Income Deposits, instead of their amount, may be increased. Thus "induced lacking" seems to me to be too precarious a source of additional savings to deserve separate notice.

  The confusion between the loss in the value of current income and the loss in the value of existing stocks of money and money claims sometimes leads to a corresponding confusions as to the ^incidence^ of Commodity Inflation. When a bank increases the volume of credit to the accomplishment of a rise of prices, it is evident that the borrower, in whose favour the additional money-credit has been created, has at his command an increased purchasing power with which he can augment his fund of working capital; and this remains true even if prices rise, and however much they rise. At whose expense has this augmentation taken place? Or, in other words, whose real income has been diminished in order to supply the increased real income in the hands of the borrowers? The obvious answerㅡbut the wrong oneㅡis to say that the transference has taken place at the expense of the depositor. It is true that the borrower, coming on to the market as an additional buyer without any diminution in the purchasing power of the existing buyers at the existing price-level, raises prices. It is also true that the increase of prices diminishes the value of the depositor's deposits, i.e. his ^command^ of purchasing power. But unless we assume that the depositors as a body were about to diminish their real-balances, the increase in the price-level, although it diminishes the value of the money-deposits, does not for that reason necessarily diminish the consumption of the depositors. So long as depositors as a body are not drawing on their previous deposits for purposes of consumption, it is not with their existing deposits that they are paying for their consumption, but with their ^current income^. This leads us to the correct answer. What the rise of prices diminishes is the value of all current incomes payable in cash. That is to say the ^flow^ of purchasing power in the hands of the rest of the community is diminished by an amount equal to the fresh purchasing power obtained by the aforesaid borrower. Furthermore, as we have seen, a benefit exactly equal to this loss in the value of current income accrues in the shape of profits to the entrepreneurs who are able to sell their current output at the enhanced price. Thus the increment of capital acquired by the new borrowers by means of the loans accorded to them is at the expense of recipients of current income; but this increment of wealth, or rather the loan which it secures, belongs not to those at whose expense it has been built up but, directly or indirectly, to the entrepreneurs who have made windfall profits by being able to dispose of their output at an enhanced price.

  To whom, on the other hand, has there accrued an increment of wealth corresponding to the loss of wealth of the depositors? Obviously to the ^old^ borrowersㅡi.e. to the borrowers who have borrowed at the previous lower price-level but will be able to repay at the new higher price-level. But this transference, whilst it is a transference of wealthㅡnot only between bank-depositors and bank-borrowers in terms of moneyㅡis not a transference which serves in any way to augment the stock of capital. For whilst the borrowers can repay when the due date of their loan arrives by parting with less purchasing power than what they had expected to part with, and therefore retain additional purchasing power which they may or may not employ to replenish working capital, the amount of credit available in the hands of the banks, as a result of these repayments of old loans, wherewith to make new loans to business, is worth correspondingly less.

(3) The Normal Course of a Credit Cycle   (p. 302)

Having emphasised sufficiently the endless variety of the paths which a Credit Cycle can follow, we may allow ourselves, by way of simplification, to pick out one path in particular which seems to us to be sufficiently frequented to deserve, perhaps, to be called the usual or normal course.

  Something happensㅡof a non-monetary characterㅡto increase the attractions of investment. It may be a new invention, or the development of a new country, or a war, or a return of "business confidence" as a result of many small influences tending the same way. Or the thing may startㅡwhich is more likely if it is a monetary cause which is playing the chief partㅡwith a Stock Exchange boom, beginning with speculation in natural resources or ^de facto^ monopolies, but eventually affecting by sympathy the price of new capital-goods.

  The rise in the natural-rate of interest, corresponding to the increased attractions of investment, is not held back by increased saving; and the expanding volume of investment is not restrained by an adequate rise in the market-rate of interest.

  This acquiescence of the Banking System in the increased volume of investment may involve it in allowing some increase in the total quantity of money; but at first the necessary increase is not likely to be great and may be taken up, almost unnoticed, out of the general slack of the system, or may be supplied by a falling off in the requirements of the Financial Circulation without any change in the total volume of money.

  At this stage the output and price of capital-goods begin to rise. Employment improves and the wholesale index rises. The increased expenditure of the newly employed then raises the price of consumption-goods and allows the producers of such goods to reap a windfall profit. By this time practically all categories of goods will have risen in price and all classes of entrepreneurs will be enjoying a profit.

  At first the volume of employment of the factors of production will increase without much change in their rate of remuneration. But after a large proportion of the unemployed factors have been absorbed into employment, the entrepreneurs bidding against one another under the stimulus of high profits will begin to offer higher rates of remuneration.

  All the while, therefore, the requirements of the industrial circulation will be increasingㅡfirst of all to look after the increased volume of employment and subsequently to look after, in addition, the increased rates of remuneration. A point will come, therefore, when the Banking System is no longer able to supply the necessary volume of money consistently with its principles and traditions.

  It is astonishing, however,ㅡwhat with changes in the Financial Circulation, in the Velocities of Circulation, and in the reserve proportions of the Central Bankㅡhow large a change in the Earnings Bill can be looked after by the Banking System without an apparent breach in its principles and traditions.

  It may be, therefore, that the turning-point will come not from the reluctance or the inability of the Banking System to finance the increased Earnings Bill, but from one or more of three other causes. The turn may come from a faltering of financial sentiment, due to some financiers, from prescience or from their experience of previous crises, seeing a little further ahead than the business world or the banking world. If so, the growth of "bear" sentiment will, as we have seen, increase the requirements of the Financial Circulation. It may be, therefore, the tendency of the Financial Circulation to increase, on the top of the increase in the Industrial Circulation, which will break the back of the Banking System and cause it at long last to impose a rate of interest, which is not only fully equal to the market-rate but, very likely in the changed circumstances, well above it.

  Or it may be that the attractions of new investment will wear themselves out with time or with the increased supply of certain kinds of capital-goods.

  Or, finally,ㅡfailing a turn-about from any of the above causesㅡthere is likely to be a sympathetic reaction, not much more than one production period after the secondary phase of the boom (the increased activity in the production of consumption-goods) has properly set in, owing to the inevitable collapse in the prices of consumption-goods below their higher level.

  Thus the collapse will come in the end as the result of the piling up of several weighty causesㅡthe evaporation of the attractions of new investment, the faltering of financial sentiment, the reaction in the price level of consumption-goods, and the growing inability of the Banking System to keep pace with the increasing requirements, first of the Industrial Circulation and later of the Financial Circulation also.

The order of events is, therefore, as follows. First, a Capital Inflation leading to an increase of Investment, leading to Commodity Inflation; second, still more Capital Inflation and Commodity Inflation for approximately one production period of consumption-goods; third, a reaction in the degree of the Commodity and Capital Inflations at the end of this period; fourth, a collapse of the Capital Inflation; and finally, a decrease of Investment below normal, leading to a Commodity Deflation.

※ Chapter 19 ends here on p. 304.

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