322

A TREATISE ON MONEY

BK. IV

the supply of money will have to be increased in aslightly greater degree in the earlier weeks and in aslightly less degree in the later weeks, since the amountof profits requiring to be financed will be increased inthe early stages and decreased later on.

The above is what would occur if the course of thecredit cycle is correctly foreseen. In practice, how-ever, it may be that the initial price rise, so far fromstimulating hoarding, will bring out into the marketadditional supplies, if this be possible, from suchhoards or normal reserves as may already exist. Theprice rise may only provoke hoarding when it haslasted for some time and has thus created mistakenexpectations about the prolonged continuance ofrising prices. In this case the rise of prices will be lessat first than in our Standard Case but subsequently itwill be greater, and, since through their miscalculationthe hoarders will still have stocks on hand at the2rth interval when the additional supplies come onthe market, the collapse will bring prices in the firstinstance below the normal level p.

We must next take account of the fact that hoard-ing normally costs something. If this cost is greaterthan the rate at which prices would rise in the absenceof hoarding, then no hoarding will take place. Thatis to say, there will be no hoarding if the cost of hoard-

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ing per time-interval is greater than _ If, onthe other hand, the cost of hoarding per time-interval

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is less than - h° arc ^ n g take place. In this

case prices will be higher in the earlier time-intervalsafter hoarding begins and lower in the later ones thanin the Standard Case. As before, however, the maxi-mum price-level will be reached immediately beforethe 2rth interval and will slump back to p in the 2rthinterval.