capital, on the other hand, is made up of this capitalized industrial material taken as a fund of values, plus good-will, plus whatever funds are obtained on credit by using this capitalized industrial material as collateral, plus funds obtained on other, non-industrial, property used as collateral. Through the competitive use of funds obtained on J credit, as spoken of above, the nominal value of the capitalized industrial material is cumulatively augmented so as to make it approximately equal to its original capitalization plus whatever funds are obtained on credit of all kinds. On tliis basis of an expanded collateral a further extension of credit takes place, and the funds so obtained are incorporated in the business capital and turned to the like competitive use, and so on.' Capital and earnings are counted in terms of the money unit. Counted in these terms, the earnings (industrial output) are also increased by the process of inflation through credit, since the competitive use of funds spoken of acts to bid up prices of whatever products are used in industry, and of whatever speculative property is presumed to have some eventual induatrial use. But the nominal magnitude (value) of the earnings is not increased in as large a ratio as that of the business capital ; since the demand whereby the values of the out-
< Cf. KniBs, Geld und Credit, Tol. U. ch. TI sec, C, especiftUy
pp. 303 et teq.
W put
THE USE OP LOAN CREDIT 109
put are regulated is not altogether a business demand (for productive goods), but is in great part, and indeed in the last resort mainly, reducible to a consumptive demand for finished goods.'
Looking at credit extension and its use for purposes of capital as a whole, the outcome which presents itself most strikingly at a period of