Speculation, bank liquidity and commodity prices

Credits to bank deposit account have their origin in bank loans, they are transferred from account by cash and check trasactions, and are cancelled by the payment of bank loans. The liquidity of bank assets depends upon the distribution of the owenership of the deposit-credits as compared to the distribution of the obligations recorded by the loan-debits. Bank loans to potential consumers have an inflationary tendency upon commoondity prices; bank loans to finance self-liquidating projects have no effect upon commodity prices. Bank loans to brokers and to stock speculators sometimes resemble loans to potential consumers and sometimes loans on self-liquidating projects. When, as in 1928 and 1929, they resemble the former type they tend towards a condition of non-liquidity of bank assets.