’It is quite true that corn has not been quite so cheap during the present year.  But even if it had been dearer than it is, it would not all at once arrest the great trade which former cheapness had created.  The “ball,” if we may so say, “was set rolling” in 1869 and 1870, and a great increase of demand was then created in certain trades and propagated through all trades.  A continuance of very high prices would produce the reverse effect; it would slacken demand in certain trades, and the effect would be gradually diffused through all trades.  But a slight rise such as that of this year has no perceptible effect.

’When the stimulus of cheap corn is added to that of cheap money, the full conditions of a great and diffused rise of prices are satisfied.  This new employment supplies a mode in which money can be invested.  Bills are drawn of greater number and greater magnitude, and through the agencies of banks and discount houses, the savings of the country are invested in such bills.  There is thus a new want and a new purchase-money to supply that want, and the consequence is the diffused and remarkable rise of price which the figures show to have occurred.

’The rise has also been aided by the revival of credit.  This, as need not be at length explained, is a great aid to buying, and consequently a great aid to a rise of price.  Since 1866, credit has been gradually, though very slowly, recovering, and it is probably as good as it is reasonable or proper that it should be.  We are now trusting as many people as we ought to trust, and as yet there is no wild excess of misplaced confidence which would make us trust those whom we ought not to trust.’

The process thus explained is the common process.  The surplus of loanable capital which lies in the hands of bankers is not employed by them in any original way; it is almost always lent to a trade already growing and already improving.  The use of it develops that trade yet farther, and this again augments and stimulates other trades.  Capital may long lie idle in a stagnant condition of industry; the mercantile securities which experienced bankers know to be good do not augment, and they will not invent other securities, or take bad ones.

In most great periods of expanding industry, the three great causes much loanable capital, good credit, and the increased profits derived from better-used labour and better-used capitalhave acted simultaneously; and though either may act by itself, there is a permanent reason why mostly they will act together.  They both tend to grow together, if you begin from a period of depression.  In such periods credit is bad, and industry unemployed; very generally provisions are high in price, and their dearness was one of the causes which made the times bad.  Whether there was or was not too much loanable capital when that period begins, there soon comes to be too much.  Quiet people continue to save part of their incomes