Forecasting business conditions . quidated, thus leads personspossessed perhaps of no unusual foresight to throw securitieson the market and continue operations in business, which stillremains good. Likewise, following a period of liquidation,money first becomes easy in Wall Street through the practice ofcountry banks in sending a portion of their cash to New Yorkbanks, to be lent on call. Their local customers would pay INSIGHT INTO BUSINESS 55 more than Wall Street does for this money, but country banksmust keep a part of their funds thus liquid. While businessmen are thawing out their froze
Forecasting business conditions . quidated, thus leads personspossessed perhaps of no unusual foresight to throw securitieson the market and continue operations in business, which stillremains good. Likewise, following a period of liquidation,money first becomes easy in Wall Street through the practice ofcountry banks in sending a portion of their cash to New Yorkbanks, to be lent on call. Their local customers would pay INSIGHT INTO BUSINESS 55 more than Wall Street does for this money, but country banksmust keep a part of their funds thus liquid. While businessmen are thawing out their frozen assets, therefore, and gettinginto shape, investors and speculators may with these otherwiseidle fimds start an advance in the security market. Banks, The Reservoir of Loanable Funds The supply of loanable funds, and the flow of such funds toand from the banks and their customers, influence at every step—it appears evident—the trend of conditions, more speciflcallythe sequence in which securities and business move. i^BWiiWi. Figure 20: How Funds Circulate Through Banks Loanable funds, based upon reserves, are shown at the left. The flow into this creditreservoir and out of it, is regulated by the banks. This circulation of loanable funds may be rendered moreclearly evident by a diagram. See Figure 20. The banks con-stitute a credit reservoir. Into this reservoir funds are ptmipedcontinually—gold being received from the mines and importedfrom other countries, deposits made by bank customers andrepayments made by borrowers. Reserves thus accumulate,upon which banks may loan with safety a considerably larger 56 FORECASTING BUSINESS CONDITIONS amount. Since making loans represents their real source ofincome, they do this. The credit reservoir is tapped by three pipes, through whichfunds are drawn out. Over one of these pipes (that placedlowest in Figure 20), the banks have less control; gold neededfor domestic currency, export or the arts has to be suppliedwhen there is dem
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Keywords: ., bookcentury1900, bookdecade1920, booksubjectbusines, bookyear1922
