As was shown in our chapter on Trade Cycles and Price Fluctuations, when commodity prices fall there is a tendency for fixed rate investments to rise, because money becomes plentiful and cheap and pushes them up, but for the profits and consequently the prices of ordinary shares to be diminished, because the lower prices make the finished article fetch less than would otherwise have been the case by the time it has gone through the process of manufacture, while food and materials are losing value all the time that they are moving through the hands of merchants and middlemen. If these tendencies act with sufficient strength and are not balanced by counteracting influences, one would therefore expect, in periods of falling commodity prices, fixed interest securities to rise and ordinary shares to fall and to disappoint their holders in the matter of income.
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Chapter XII
