II

INFLATION AND DEFLATION

T 73

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and unobserved ways on new enterprise. Forit means that the banks are less willing thanthey would normally be to finance any projectwhich may involve a lock-up of their resources.

Now, in estimating the quantitative import-ance of the factor to which I am calling atten-tion, we have to consider what has been happen-ing to the prices of various types of property.There are, first of all, the principal raw materialsand foodstuff's of international commerce. Theseare of great importance to the banks, becausethe stocks of these commodities, whether inwarehouse or in transit or embodied in half-finished or unsold manufactured articles, arevery largely financed through the banks. Inthe last eighteen months the prices of thesecommodities have fallen on the average by about25 per cent. But this is an average, and bankscannot average the security of one customerwith that of another. Many individual com-modities of the greatest commercial importancehave fallen in price by 40 to 50 per cent or evenmore.

Next come the ordinary or common sharesof the great companies and corporations whichare the market leaders in the Stock Exchanges of the world. In most countries the average fallamounts to 40 to 50 per cent; and, this again,is an average which means that individualshares, even amongst those which would havebeen considered of good quality two years ago,have fallen enormously more. Then there arethe bonds and the fixed interest securities.