Page:The Economics of Unemployment.djvu/113

periods of trade revival or prosperity where excessive confidence leads traders and bankers to expect and provide for further advances of trade, prices and profits, which are not going to take place.

These misuses, or excesses, of commercial credit are responsible for exaggerating the cyclical fluctuations, but they do not have any considerable effect upon the permanent distribution of wealth as between the different classes. For the greater part of the large profits made in the rising prices and expanding trade of a boom is lost in the subsequent depression.

But the war-period exhibited credit phenomena which have left lasting results of a different kind. A large part of the war credit, created either by governments or banks for financing the war, did very little to stimulate the total volume of production. It operated to convert a larger and larger proportion of the same volume of production into war supplies, a smaller proportion into civil supplies. Thus, increasing the volume of purchasing power without any corresponding increase of output, it was pure inflation, and was responsible for the great rise of prices that ensued. In proportion as various countries financed their national expenditure by these means, they were preparing a huge debt which was to alter the subsequent distribution of the national income to the advantage of the 'capitalist' classes and the disadvantage of the workers, entailing those reactions upon regularity and fullness of employment which we have already discovered. The connection between the inflation which the governments and banks conspired to produce and the magnitude and ownership