.

That land speculation is one cause of depressions, I do not doubt, but I do not believe it is the main cause.

Yes, it is true that in periods of prosperity land values grow faster than wages and interest, in part through an artificial shortage caused by holding land out of use for future resale possibilities (i.e., land speculation). This puts an increasingly larger burden on the active producers, labor and capital, as they have to pay more and more for the use of land. They can borrow to pay off the increasing burden, but this can be a contributory cause of depressions.

But this contributory cause can hardly be the major cause. Land values, it seems to me, would have to be much more than they are to cause the whole economic structure to totter and fall. Remember also that the speculative value of land is only part, the much lesser part, of the total value of land. Isn't the amount of speculative land rent a small part of total G. N. P., too small to be 'a major cause of depressions?

A sudden shortage of the money supply, on the other hand, could cause effective demand to suddenly decrease, leaving goods unbought on the shelves and starting the depression cycle on its way. A sudden blow to business confidence in the future -- a fragile flower indeed -- could cause this decrease in the money supply, particularly insofar as time and demand deposits are concerned. Recent economic history has shown that slight variations in the money supply, occasioned either by government or Federal Reserve action, have had immense effects upon the economy's growth or decline.

Henry George recognized that a sudden increase in the money supply in a depression could reverse the downward cycle, in this way presaging Keynesiianism (see p.558 in the biography by his son).

Keynesianism and Georgism are not mutually conflicting. The one talks about the need for money regulation (counter-cyclical government borrowing from banks) and the other talks about the need for land rent taxation. We should be advocating both.

Even in a Georgist economy, depressions would result unless the money supply is carefully controlled.