ILLICIT  JUMPS

115

mediate  cause  ot  a  fall  of  prices  is  an  actual  increase
of  supply  in  its  relation  to  quantity  demanded.  It  is  of
real  importance  to  recognise  that  an  actual  over-stock  is
necessary  to  bring  about  a  fall  of  prices,  and  that  nothing
else  can  bring  it  about.
This  changed  relation  of  Supply  and  Demand  exhibited
in  an  over-stock  may  not  be  considerable  and  may  involve ­
  no  great  or  lasting  waste,  but  it  must  exist  or  be
believed  to  exist.  When  therefore  we  are  told  that  such
and  such  political,  industrial,  financial  facts,  a  rumour  of
war,  a  protective  tariff,  an  influx  of  gold  have  brought
about  a  “fall  of  prices,”  we  know  that  these  forces  lie
outside  the  direct  line  of  action  and  can  only  affect
prices  by  either  increasing  supply  or  by  reducing  demand.
So  when  monetary  authorities  tell  us  that  the  great  fall  of
wholesale  prices  since  1873  is  due  to  matters  affecting
the  supply  of  gold  and  silver  money,  we  do  right  to
insist  on  being  shown  precisely  how  the  alleged  deficiency
in  quantity  of  money  has  affected  the  quantitative  relation
between  supply  and  demand  for  goods  so  as  to  reduce
the  proportion  which  the  latter  holds  to  the  former.
§3.  Illicit  Jumps  in  Monetary  Explanations
of  “  Depression
The  connection  between  money  and  price  in  discussions
of  commercial  crises  and  depressions  is  generally  made
by  a  process  of  illicit  jumps.  Somehow  or  other,  we  are
told,  an  increased  quantity  of  “  money  ”  will  form  a  basis
of  improved  credit  and  with  the  improved  credit  commercial ­
  confidence  will  revive,  confidence  will  establish  enterprise ­
  and  general  activity  affording  increased  employment
of  capital  and  labour,  and  higher  prices  will  ensue.