MONEY INTEREST AND REAL INTEREST

it a theoretical limitation on the possible rate of (fore-known) appreciation of any good.

It is important to emphasize the fact that these limitsimposed on the rates of interest and appreciation implythe possibility of hoarding wheat, or other durable com-modities, including money, without loss. If money werea perishable commodity, like fruit, the limits would evi-dently be pushed into the region of negative quantities.One can imagine a loan expressed in strawberries orpeaches, contracted in summer and payable in winter,with negative interest. 6 Analogously we may regard thestorage and other costs of carrying wheat as permitting,to that extent, a negative rate of interest in terms ofwheat. It follows that even the rate of interest in termsof money may be negative when money is in sufficientdanger of being lost or stolen, as during a riot or in-vasion.

But as long as our monetary standard is gold or otherimperishable commodity, so that there is always the op-portunity to hoard some of it, no rate of interest ex-pressed therein is likely to fall to zero, much less to fallbelow zero. This principle is a special case of a more gen-eral principle of opportunity which will be developedlater.

§4. Real and Money Interest

The theoretical relation existing between interest andappreciation implies, then, that the rate of interest isalways relative to the standard in which it is expressed.The fact that interest expressed in money is high, say15 per cent, might conceivably indicate merely that gen-eral prices are expected to rise (i.e., money depreciate)

* Bohm-Bawerk , The Positive Theory of Capital, pp. 252 and 297;Landry, L’lnteret du Capital, p. 49.

[41]