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

508 Money, Bank Credit, and Economic CyclesNOTES ON TABLE VI-11. All references to “increases” and “decreases” in pricesrefer to relative prices, not nominal prices or absolutemagnitudes. Thus, for example, an “increase in theprices” of consumer goods indicates that such pricesrise, in relative terms, with respect to those of intermediategoods.2. It is simple to introduce the necessary modificationsin the stages of the theoretical processes summarizedin the table to include the historical peculiarities ofeach cycle. Hence if a rise in voluntary saving isaccompanied by an increase in hoarding or thedemand for money, the phases will remain the same,yet there will be a greater nominal decrease in theprice of consumer goods, and a lesser increase in thenominal price of the factors of production. Nonethelessall relationships among relative prices remain justas depicted in the table. In the case of credit expansion,if “idle capacity” exists at its initiation, the nominalprice of the factors of production and capitalgoods will not rise as significantly in the beginning,though the rest of the stages will follow as described,and foolish investments will also pile up.3. Though the number which follows the letter “S”denotes the order of the stages, in certain cases thisnumbering is relatively arbitrary, depending uponeach particular historical situation and whether or notthe stages take place more or less simultaneously.4. In real life the process could come to an indefinite haltduring any of the phases, if government interventionmakes markets highly rigid, and specifically if theprices of intermediate goods, wages or labor legislationare successfully manipulated. Furthermore a progressiveincrease in credit expansion may postponethe eruption of the crisis (and/or the liquidation ofthe malinvestments), but it will make it deeper andmore painful when it inevitably hits.