INTRODUCTORY

The black central field and the red ring, together, represent the country’s money supply; consisting partly of coin, or certificates backed by coin; partly of bank notes; and partly of bank money (deposits in commercial banks, “money in bank”).

The black central field represents such of the country’s cash funds as are available for investment, or for lending purposes; the red ring, all cash funds not so available and all other money in the country. The lines between the centre and the ring show the movements of money in connection with the processes of saving and investing; the wider the lines, the greater the values they represent The Money Market (central field) is fed principally by the red lines, savings, which carry funds from the ring to the centre; it is drained by the black lines, which carry the money back from the centre to the ring. Most of the black lines, but not all of them, represent investments.

The red ring shows, by means of the large arrows, the circulation of money in the regular course of business. It is divided into two sections, pink and carmine. The latter represents the money that happens to be, at a given moment, in the people’s possession in the shape of income: money available for expenditures and for buying commodities (Purchase Money). The pink section represents money neither available for spending nor for investment, being needed by business men for carrying on their regular business.

Whenever “Purchase Money” (Income) is expended in the purchase of commodities, say of a hat costing $2.50, it leaves the carmine field and crosses the “Purchase Line” (which see), becoming business Money in the hands of the hatter. When he replenishes his stock and new goods are being made, that amount will be split up as follows: the retailer retains $1.00 as his profit; the wholesaler 2Sc. ; the hatmaker 65c. ; the manufacturers of the raw material 50c.; the transporters IOC. Thus the Purchase Money, after passing the Purchase Line, will, in its course around the pink circle, reach in turn the retail dealer (lower left), the wholesale dealer (upper left), the manufacturer (upper right), the manufacturer of material (lower right) — each of these parties retaining a portion as income (wages or profits) until the whole of the money in its course around the circle has passed the Income Line (which see) and becomes income again.

The central field is small, compared with the pink field; so are the funds of the Money Market, compared with those employed by business men. It should be well understood that the former are available for investment, but the latter are not; they have already found investment — in the shape of liquid capital needed in business.

LINK

http://bikibook.com/books/a-neglected-point-in-connection-with-crisis/


EMBED

<iframe frameborder="0" scrolling="no" style="border:0px" src="http://bikibook.com/books/a-neglected-point-in-connection-with-crisis/" width=500 height=500></iframe>

Related posts:

1. A History of Modern Banks of Issue With An Account of the Economic Crises of the Present Century by Charles A. Conant PREFACE THE reason for being of this work is the...
2. An Inquiry into the Currency Principle: The Connection of the Currency with Prices and the Expediency of A Separation of Issue From Banking PREFACE BY THE AUTHOR SOME part of the following pages...
3. A Century of Finance : Martin’s History of the Boston Stock and Money Markets PREFACE BY THE AUTHOR The present edition of this work...
4. An Outline of the Money Market Synopsis 1. The Evolution of the Money Market. 2. The...
5. Investment and Speculation by Louis Guenther INTRODUCTION Every head of a corporation, every business man, in...

Tags: Accumulation Capital, Banking, banking system, Banks, Capital Political Economics, corporate finance, Crash, Currency, speculation, stock market