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 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 of the successive vendors of the 
land. The value of the land in so far as it is not directly owned has its 
counterpart in an equal value of financial instruments which served to finance 
the successive purchases in the same way as reproduceable real capital has its 
counterpart in the instruments of credit which made its coming into existence 
possible. The current increase in land value, as far as it is realised ( by the 
land changing hands ) is financed by saving in form of financial assets. Since 
these gains seem to be quite sizeable it appears that Ricardo *s rent has not