160 THE GENERAL THEORY OF EMPLOYMENT BK. IV

brokerage charges and the heavy transfer tax payableto the Exchequer, which attend dealings on the LondonStock Exchange, sufficiently diminish the liquidity ofthe market (although the practice of fortnightly accountsoperates the other way) to rule out a large proportionof the transactions characteristic of Wall Street .1 Theintroduction of a substantial Government transfer taxon all transactions might prove the most serviceablereform available, with a view to mitigating the pre-dominance of speculation over enterprise in the UnitedStates.

The spectacle of modern investment markets hassometimes moved me towards the conclusion that tomake the purchase of an investment permanent andindissoluble, like marriage, except by reason of deathor other grave cause, might be a useful remedy for ourcontemporary evils. For this would force the investorto direct his mind to the long-term prospects and tothose only. But a little consideration of this expedientbrings us up against a dilemma, and shows us how theliquidity of investment markets often facilitates, thoughit sometimes impedes, the course of new investment.For the fact that each individual investor flatters himselfthat his commitment is “liquid” (though this cannot betrue for all investors collectively) calms his nerves andmakes him much more willing to run a risk. Ifindividual purchases of investments were renderedilliquid, this might seriously impede new investment,so long as alternative ways in which to hold his savingsare available to the individual. This is the dilemma.So long as it is open to the individual to employ hiswealth in hoarding or lending money , the alternative ofpurchasing actual capital assets cannot be renderedsufficiently attractive (especially to the man who does

1 It is said that, when Wall Street is active, at least a half of the purchasesor sales of investments are entered upon with an intention on the part of thespeculator to reverse them the same day. This is often true of the commodityexchanges also.