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A TREATISE ON MONEY

BE. Ill

of prices and profits. TRus we may conclude that, asa rule, the existence of profit will provoke a tendencytowards a higher rate of employment and of remunera-tion for the factors of production ; and vice versa.

Next let us step backwards. In order that pro-ducers may be able, as well as willing, to produce ata higher cost of production and to increase their non-available output, they must be able to get commandof an appropriate quantity of money and of capitalresources ; and in order that they may be willing, aswell as able, to do this, the rate of interest whichcommands over such resources-costs must not be sohigh as to deter them. How much bank-credit theyhave to borrow in order to obtain command over asufficient quantity of money depends on what thepublic is doing with its savings—on the relative attrac-tions of savings-deposits and of securities respec-tively. But whatever the public may be doing, andwhatever may prove to be the strength or weaknessof the motive of producers to increase that proportionof their output which is non-available, the bankingsystem comes in as a balancing factor; and bycontrolling the price and quantity of- bank-credit thebanking system necessarily controls the aggregateexpenditure on output.

x Thus the first link in the causal sequence is thebehaviour of the banking system, the second is thecost of investment (so far as the purchasing powerof money is concerned) and the value of investment(so far as the price-level of output as a whole is con-cerned), the third is the emergence of profit and loss,and the fourth is the rate of remuneration offered bythe entrepreneurs to the factors of production. Byvarying the price and quantity of bank-credit thebanking system governs the value of investment;upon the value of investment relatively to the volumeof savings depend the profits or losses of the producers ;the rate of remuneration offered to the factors of