Only when it had been completed was the way prepared

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For a rate of investment in other directions, which is sufficient to produce an upward movement when there is no current disinvestment in stocks to set off against it, may be quite inadequate so long as such disinvestment is still proceeding. We have seen, I think, a signal example of this in the earlier phases of America’s New Deal. When President Roosevelt’s juicy couture sale substantial loan expenditure began, stocks of all kinds and particularly of agricultural products still stood at a very high level. The New Deal partly consisted in a strenuous attempt to reduce these stocks by curtailment of current output and in all sorts of ways. The reduction of stocks to a normal level was a necessary process a phase which had to be endured. But so long as it lasted, namely, about two years, it constituted a substantial offset to the loan expenditure which was being incurred in other directions.

Only when it had been completed was the way prepared for substantial recovery. Recent American experience has also afforded good examples of the part played by fluctuations in the stocks of finished and unfinished goods inventories as it is becoming usual to call them in causing the minor oscillations within the main movement of the Trade Cycle. Manufacturers, setting juicy couture baby fluffy industry in motion to provide for a scale of consumption which is expected to prevail some months later, are apt to make minor miscalculations, generally in the direction of running a little ahead of the facts. When they discover their mistake they have to contract for a short time to a level below that of current consumption so as to allow for the absorption of the excess inventories; and the difference of pace between running a little ahead and dropping back again has proved sufficient in its effect on the current rate of investment to display itself quite clearly against the background of the excellently complete statistics now available in the United States.

FOR some two hundred years both economic theorists and practical men did not doubt that there is a peculiar advantage to a country in a favourable balance of trade, and grave danger in an unfavourable balance, particularly if it results in an efflux of the precious metals. But for the past one hundred years there has been a remarkable divergence of opinion. The majority of statesmen and practical men in most countries, and nearly half of them even in Great Britain, the home of the opposite view, have remained faithful to the ancient doctrine; whereas almost all economic theorists have held that anxiety concerning such matters is absolutely groundless except on a very short view, since the mechanism of foreign trade is selfadjusting and attempts to interfere with it are not only futile, but greatly impoverish those who practise them because they forfeit the advantages of the international division of labour.