comes, not when this body of outstanding contracts have run out or been filled, but when the business of filling them and of filling the orders to which they give rise no longer occupies the attention of the business community in greater measure than the rest of current business.
The run of business exigencies on which an era of prosperity goes forward may be sketched in its general features somewhat as follows : Increased demand and enhanced prices, with the large contracts which follow from such a state of the market, increase the prospective earnings of the several concerns engaged. These prospective earnings may eventually be realized in full measure, or they may turn out to have been putative earnings only ; that ia largely a question of how far in the future the liquidation lies. The business effect of increased prospective earnings, however, ia much the same whether the event proves the expectation of increased eaminga to have been well grounded or not. The expectation in either case leads the business men to bid high for equipment and supplies. Thereby the effective (market) capitalization is increased to answer to the increased prospective earnings. This recapitalization of industrial property, on the basis of heightened expectation, increases the value of this property as collateral. The inflated property becomes, ID effect, collateral even without a formal
extension of credit in the way of loans ; because, in effect, the contracts entered into are a credit extension, and because the property of the contracting parties is liable to be drawn into Hquidar tion in case of non-fulfilment of the contracts. But diu-ing the free swing of that buoyant enters prise that characterizes an era of prosperity contracts are entered into with a somewhat easy scrutiny of the property values available to secure a contract. So that as regards this point not only is the capitaUzation of the industrial property infiated on the basis of expectation, but in the making of contracts the margin of security is less