INDUSTRY AND FINANCE DISTINGUISHED AND DEFINED

We must now devote ourselves to the analysis of the factors which tend to bring about changes in the value of money and to their mode of operation.

For this purpose it is necessary to make yet a further classification cutting, to a certain extent, across our division of the total quantity of money (in chapter 3) into the income deposits, the business deposits and the savings deposits—namely a division between the deposits used for the purposes of industry, which we shall call the industrial circulation, and those used for the purposes of finance, which we shall call the financial circulation.

By industry we mean the business of maintaining the normal process of current output, distribution and exchange and paying the factors of production their incomes for the various duties which they perform from the first beginning of production to the final satisfaction of the consumer. By finance, on the other hand, we mean the business of holding and exchanging existing titles to wealth (other than exchanges resulting from the specialisation of industry), including stock exchange and money market transactions, speculation and the process of conveying current savings and profits into the hands of entrepreneurs.

Each of these two branches of business utilises a certain part of the total stock of money. Broadly speaking, industry requires the use of the income deposits and of a part of the business deposits, which we will call business deposits A; whilst finance requires the use of the savings deposits and of the remainder of the business deposits, which we will call business deposits B.