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as over-trading. As soon as this is recognised, the confidence both of bankers and of business men begins to wane, credits are restricted and drawn in because of the belief that trade is going down, and this belief and this restriction are the means of reducing the volume of trade and contracting its profits. Thus a depression is brought on "because of their unbelief."

Now it is quite evident that confidence and credit, their rise and collapse, play an important part in trade fluctuations and volume of employment. I have purposely ignored this in my previous analysis, because I desire to obtain a definite reply to two related questions. First, what is the actual part played by credit in bringing about cyclical depressions? Secondly, assuming such social reforms as we advocate for the absorption of surplus income in wages and public revenue, would the psychological waves of confidence and credit continue to produce their effects? Now, in discussing the first question, I must dismiss at the outset as illicit and unnecessary the assumption of any psychological movement independent in its origin of the industrial situation. I cannot begin by assuming a rising and waning tide of confidence wholly divorced from economic facts. Although this vague notion of a purely mental origin of business confidence often finds expression, I do not think that any able business man would maintain it under cross-examination. He would always admit that the rising or waning confidence in the business world was based on facts or supposed facts relating to movements of the markets, i.e. upon actual sales or contracts.

I think he would assent to the following account