4 
when he purchased the land. The capital gain represents an 
increase in the sum of financial assets which ideally represent 
the counterpart of the land. There is thus an increase in the 
value of assets which represents saving. If this statement is not 
easy to accept for traditional Keynesian theory this is due to the 
idea that saving should represent something real like 
reproduceable capital and not the finance of a mere change in 
value. But in fact this idea is anyhow abundoned since it is 
recognised that budget deficits require saving to be financed. 
We have only talked about hausse so far but the case of 
baisse might be thought to be symmetrical. We assume again finance 
by bank credit. The vendor receives less than he needs to pay back 
the debt he incurred when he purchased the land. The remaining 
debt - his capital loss - represents dissaving. If he repays it 
from his own funds the total bank credit outstanding will be 
reduced which involves a credit restriction. If he is not able to 
repay when he is pressed ( which may happen in view of 
expectations produced by the decline in values ) then he will 
become insolvent. This implies an assymetry of the effects of boom 
and bust. 
When there is general inflation capital gains may be illusory 
in so far as they do not enable the owner to consume it as long as 
he wants to keep his wealth intact. The gain must therefore be 
measured in terms of purchasing power of consumer goods or 
possibly in terms of wage units ( power to purchase labour for 
purpose of investing in reproduceable capital ). 
III. RICARDO'S RENT. 
If land is valued at the price paid when it last changed hands 
then the value of land consists of the accumulated capital gains