The immediate occasion of such a crisis, then, is that there arises a practical discrepancy between the earlier effective capitalization on which the collateral has been accepted by the creditors, and the subsequent effective capitalization of the same collateral shown by quotations and sales of the securities on the market. But since the earlier capitalization commonly, in the normal case, comes out of a period of business prosperity, the point of inquiry is as to the ground and method of this effective capitalization of collateral during the period of prosperity that goes before a crisis, and this, in turn, involves the question of the nature and causes of a period of prosperity.
The manner in which the capitalization of col-
lateral, and thereby the discrepancy between the putative and actual eaming-capacity of capital, is increased by loan credit during an era of prosperity has been indicated in some detail in Chapter Y. above. But it may serve to enforce the view there taken, if it can be shown on similar lines that a period of prosperity will bring on a like discrepancy between putative and actual eaming-capacity, and therefore between putative and eventual capitalization of collateral, even independently of the expansion effected by loan credit.
A period of prosperity ja no more a matter of course than a crisis. It has its beginning in some specific combination of circumstances. It takes its rise from some traceable favorable disturbance of the course of business. In such a period the potent fact which serves as incentive to the accelI eratton of business is a rise of prices. This rise of prices presently becomes general as prosperity progresses and becomes an habitual fact, but it takes its start from some specific initial disturbance of prices. That is to say, prices rise first in some one industry or line of industries.^