3 
produce savings to finance the appreciation of these assets. A 
hausse in land or share values would then create effective demand 
just like real investment. 
How does it work? Let us assume, to start with, that all 
transactions in land are financed by bank credit. The buyer of 
land who is motivated by expectation of hausse will pay a higher 
than the usual price for it. He finances his purchase with bank 
credit. The seller of the land will use the proceeds of his sale 
in order to pay back the credit he had taken when he in turn 
bought the land. But since he had paid less than he has now 
received he has got a surplus, his realised capital gain. And the 
banking system is left with an addition to its credits 
outstanding, so there is clearly an expansion of credit. Even 
though there is nothing of substance behind this additional credit 
it will create effective demand just as if there were. 
The seller of the land may be assumed to hold his gain in the 
first place in form of short term assets. In this way the saving 
created is evident. He may then use his gain for consumption (or 
if it is a corporation, for paying out dividends ) or for real 
investment or he may buy bonds. In so far as he consumes this will 
create a multiplier effect leading to the creation of an equal 
amount of saving. This is analogous to the effect of 
consumers'credit. In both cases the consumption does not arise 
from the circulation of income but rather like an exogenous 
influence comes from outside ( analogous to investment ). 
The situation ought not to be different in principle if the 
transactions are not carried out by means of bank credit but with 
the purchasers own funds. The vendor receives a sum which is more 
than sufficient to replace the funds which he in his turn used up