218 THE GENERAL THEORY OF EMPLOYMENT fk. iv

and the standard of life sufficiently miserable to bringsavings to zero. More probably there will be a cyclicalmovement round this equilibrium position. For ifthere is still room for uncertainty about the future, themarginal efficiency of capital will occasionally rise abovezero leading to a “boom”, and in the succeeding“slump” the stock of capital may fall for a time belowthe level which will yield a marginal efficiency of zeroin the long run. Assuming correct foresight, theequilibrium stock of capital which will have a marginalefficiency of precisely zero will, of course, be a smallerstock than would correspond to full employment of theavailable labour; for it will be the equipment whichcorresponds to that proportion of unemployment whichensures zero saving.

The only alternative position of equilibrium wouldbe given by a situation in which a stock of capitalsufficiently great to have a marginal efficiency of zeroalso represents an amount of wealth sufficiently greatto satiate to the full the aggregate desire on the partof the public to make provision for the future, evenwith full employment, in circumstances where no bonusis obtainable in the form of interest. It would, how-ever, be an unlikely coincidence that the propensityto save in conditions of full employment should becomesatisfied just at the point where the stock of capitalreaches the level where its marginal efficiency is zero.If, therefore, this more favourable possibility comes tothe rescue, it will probably take effect, not just at thepoint where the rate of interest is vanishing, but atsome previous point during the gradual decline of therate of interest.

We have assumed so far an institutional factorwhich prevents the rate of interest from being negative,in the shape of money which has negligible carryingcosts. In fact, however, institutional and psychologicalfactors are present which set a limit much above zeroto the practicable decline in the rate of interest. In