[513] Social Value, 1911, passim, especially ch. XIII. Cooley, C. H., "Institutional Character of Pecuniary Valuation," Am. Jour. of Sociology, Jan. 1913.
[514] Cf. my article, "Schumpeter's Dynamic Economics," Political Science Quarterly, Dec. 1915, and the chapter on "Marginal Utility," supra. That the new bank-credit, without the painful preliminary "abstinence" which the classical economics has stressed, is enough to provide capital for a new enterprise is, as Schumpeter insists, true. Schumpeter has made an important contribution in his emphasis on this too much neglected point. But it should be noted that this does not dispense with curtailing of consumption, and "abstinence." It merely shifts the necessity for curtailing consumption to some one else. The new plan of the dynamic entrepreneur, by means of bank credit, draws labor and capital away from the existing static enterprises. That curtails their output. That leaves less goods of the old kinds for people to consume. That means higher prices for consumption goods, in the interval between the starting of the new enterprise and the time when its finished products are added to the "real income" of the community. Extensions of bank credit, there, shift the burden of "abstinence" to the consumer, and to the static producer. "Saving" is still the source of capital, but it is involuntary saving.
[515] In 1912, the First National Bank of New York owned 43 millions of bonds, but no stocks. Report of Pujo Committee, Feb. 28, 1913, p. 66. The National City Bank had 33 millions in bonds, but no stocks. Ibid., p. 72. State banks own few stocks; trust companies own a good many.
[516] Cf. the chapter on "The Origin of Money," supra.
[517] In March, 1916, one of the largest banking houses in Boston informed the writer that over one-fourth of its notes and discounts (including all forms of loans) had been bought through note-brokers.
[518] Cf., e. g., pp. 135ff. of Scott's excellent Money and Banking, Rev. ed., New York, 1910.
[519] The year 1909 is chosen, in order that comparison may be more readily made with the figures of Dean Kinley's investigations based on reported deposits made on March 16 of that year. The figures quoted are taken from p. 39 of the Report of the Comptroller for 1913.
[520] Even excluding the item "due from other banks and bankers," as representing duplications, the item "other loans and discounts" remains approximately only one-fourth of total banking assets.
[521] Almost all agricultural processes require more than six months from their inception to the marketing of the product.
[522] This view would seem to correspond with the view of Babson and May (Commercial Paper, 1912), and of W. A. Scott ("Investment vs. Commercial Banking," Proceedings of Investment Bankers' Association of America, 1913, pp. 81-84). Both of these discussions appear in Moulton, Money and Banking, Pt. II, pp. 70 and 75-77. Dr. J. E. Pope considers the view correct. On the other hand, Professor O. M. W. Sprague thinks the "other loans and discounts" of large city banks are more liquid than my statement would indicate.