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A TREATISE ON MONEY

BK. IV

lacking ” when this results from genuine savings.Yet there are other ways of augmenting the IncomeDeposits,—for example, by a transfer from the SavingsDeposits or by refraining from the purchase of securi-ties with normal current savings ; or the velocityof the Income Deposits, instead of their amount, maybe increased. Thus “ induced lacking ” seems to meto be too precarious a source of additional savings todeserve separate notice.

The confusion between the loss in the value ofcurrent income and the loss in the value of existingstocks of money and money claims sometimes leads toa corresponding confusion as to the incidence of Com-modity Inflation. When a bank increases the volumeof credit to the accompaniment of a rise of prices,it is evident that the borrower, in whose favour theadditional money-credit has been created, has at hiscommand an increased purchasing power with whichhe can augment his fund of working capital; and thisremains true even if prices rise, and however much theyrise. At whose expense has this augmentation takenplace ? Or, in other words, whose real income hasbeen diminished in order to supply the increasedreal income in the hands of the borrower ? Theobvious answer—but the wrong one—is to say thatthe transference has taken place at the expense of thedepositor. It is true that the borrower, coming onto the market as an additional buyer without anydiminution in the purchasing power of the existingbuyers at the existing price-level, raises prices. It isalso true that the increase of prices diminishes thevalue of the depositor’s deposits, i.e. of his commandof purchasing power. But unless we assume that thedepositors as a body were about to diminish theirreal-balances, the increase in the price-level, althoughit diminishes the value of the money-deposits, does notfor that reason necessarily diminish the consumptionof the depositors. So long as depositors as a body are