IN GEOMETRIC TERMS

horizontal shift from P’s to Q’s to the right (by all bor-rowers combined) must equal the aggregate horizontalshift from P’s to Q’s to the left (by all lenders combined);and also that the two aggregate vertical shifts represent-ing next year’s repayments of loans must likewise beequal, so that the centers of gravity of the P’s and the Q’scoincide.

(4) Market principle B (that all loans are repaid andat one rate of interest) is represented by the fact that theMarket lines are straight and parallel.

§16. The Geometric Method

These charts do, for the ideas they illustrate, whatsupply and demand curves do for the ideas illustratedby them.

Like all graphic methods, the one here applied is in-tended to segregate basic tendencies from the rough-and-tumble of real life, and set these tendencies going as theycannot go in real life. It condenses a year’s income intoan infinitesimal time; it confines our variations to twoyears only; it disregards the element of risk; it picturesnext year’s income as a certainty; it disregards the lack ofsecurity that limits the ease with which an individual canslide his series of transactions along the M line; it as-sumes that the market is perfect.

Again, the Willingness lines should not be drawn ascontinuous curves. They are actually rough and jagged,so that, for this reason alone, the nicety of adjustmentwhich would obtain under the assumption of continuityis lost. We know also that most individuals require a con-siderable stimulus even to start sliding along a Marketline. Besides the height of the rate of interest, there is thetrouble of negotiating a loan, establishing a line of credit,

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