314

A TREATISE ON MONEY

BK. IV

a case the temporary reduction of the level of realwages, which is an inevitable accompaniment of thefull employment of the factors of production (as itwould be of saving for any other purpose), means anincrement of wealth which accrues to the communityas a whole.

(5) Furthermore the increment of wealth accruingto entrepreneurs as a class will accrue mainly to thoseentrepreneurs who already have goods in process atthe moment when employment begins to increase, andnot at all to those who set on foot the increased volumeof production, since these will obtain only normal pricesfor their output when it becomes available; in otherwords the forward price for a date ahead correspondingto the length of process will remain normal throughout,showing a backwardation as compared with the spotprice, i.e. the latter will have risen to a premium overthe forward price.

(6) The price p' of working capital, which is muchthe same as the index number of raw materials atwholesale, will, on the assumption of perfect forecast-ing, rise at once to a greater extent than p, which is theprice-level of available output, i.e. of liquid consump-tion goods. For whilst the value of working capital, inthe shape of goods which have been started into the pro-ductive process after the beginning of the credit cycle,will not rise, inasmuch as, when they are finished, theywill only sell for the old price ; nevertheless the valueof working capital, in the shape of goods which, al-though still non-available, were already partly finishedwhen the cycle began, will reflect the anticipatedhigher price for available output at the date whentheir process will be completed—that is to say p', theprice-level of raw materials and half-finished goods,will on the average, assuming correct forecasting, risemuch more sharply than p, namely to a level inter-

mediate between p and p( 1 +-).