That is the doctrine known as the "vicious circle of wages and prices." It has been well stated by Mr. Layton: "It is often asserted that a rise in wages is only a move around a vicious circle, the argument being put thus; starting with a rise in wages achieved, let us say, as the result of a strike, the increased wage bill will add to the cost of production, and so raise prices; if the rise becomes general, the cost of living will increase and diminish the purchasing power of wages; this will produce a renewal of discontent among the working classes and result, perhaps, in a further demand, culminating in a strike for still higher wages."[56] This doctrine is affirmed somewhat indifferently, when the demands for increased wages are made during a period of a relatively steady price level, or during a period in which the price level is rising steadily. What elements of truth does it possess and what is its importance? The first thing to note is that the series of events visualized in the above quotation can be set into motion by any other cause which disturbs the price level just as well as by a demand for increased wages. For example, a great influx of gold into the United States may take place as a result of a steadily favorable balance in international trade. Bank reserves may mount, discount rates may fall, and if all other circumstances happen to be already favorable, a period of increased industrial activity may follow. Demand for basic products will increase and prices will begin to rise. With the tendency of prices to rise, the general demand for labor will increase. Wage demands will follow, and all the conditions required to make the theory applicable are supplied. Certain conclusions may be stated at once. Firstly, the industrial situation is rarely so balanced, no matter what the price situation, that a measure of wage increase may not be possible without an equivalent increase in prices. The distributive situation is never one of static equilibrium. The gain of one group or agent of production may simply be another's loss. Each group or agent strives for a large return. If wages go up, profits may go down, or new methods of production may be devised, or strikes may cease. The same possibilities exist in essentials, irrespective of any prior price movement. The movement of prices upward simply gives ground for the presumption that there is a greater possibility than usual of increasing wages without causing equivalent price increases.