Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

336 Money, Bank Credit, and Economic CyclesChart V-4 is simply the result of superimposing Chart V-1(line) on Chart V-3 (bar), and it shows the impact on the productivestructure of the 25 m.u. growth in voluntary net saving.Hence we see that the voluntary increase in saving provokesthe following effects:• First: a deepening of the capital goods structure. This outcomemanifests itself as a vertical “lengthening” of theproductive structure via the addition of new stages (inour example, stages six and seven, which did not existbefore).• Second: a widening of the capital goods structure, embodiedin a broadening of the existing stages (as in stagesfour and five).• Third: a relative narrowing of the capital goods stagesclosest to consumption.• Fourth: In the final stage, the stage of consumer goodsand services, the jump in voluntary saving invariablygenerates an initial drop in consumption (in monetaryterms). However the lengthening of the productivestructure is followed by a substantial real increase (interms of quantity and quality) in the production of consumergoods and services. Given that the monetarydemand for these goods is invariably reduced, andgiven that these two effects (the drop in consumptionand the upsurge in the production of consumer goods)exert similar influences, the increase in production givesrise to a sharp drop in the market prices of consumer goods.Ultimately this drop in prices makes it possible for a significantreal rise in wages to occur, along with a generalincrease in all real income received by owners of theoriginal means of production. 5555 The above considerations reveal once again the extent to which traditionalnational income statistics and the measures of growth in nationalincome are theoretically inadequate. We have already pointed out thatthe indicators of national income do not measure the gross national outputand tend to exaggerate the importance of consumption, while overlookingthe intermediate stages in the production process. It is also truethat the statistical measures of economic growth and of the evolution of