Page:The Economics of Unemployment.djvu/68

shrinkage and falling prices, they share in an excessive degree the fears of their customers and help to realise those fears by a credit policy of excessive stringency. So, it is suggested, the finance policy of banks is largely responsible for the excessive activity of trade and the height of the rise of prices in a boom, and for the excessive slackness and fall of prices in a slump. Their excesses alike in expansion and contraction of credit are held responsible for the actual movements of industry.

But such criticism imputes too much responsibility to expansions and contractions of credit as efficient causes of industrial changes.^[1] The language often used suggests that a trade boom and the credit policy supplying it are in themselves an economic movement that involves by some natural necessity a corresponding trade slump. In other words, the cyclical fluctuation is regarded as a law of industrial life in the same sense as the rhythmic movement of respiration in the body or of the seasons in the year, the operation of the credit system serving to exaggerate its inevitable