THE THEORY OF INTEREST

the relation of the rate of interest to those changes wouldhave no practical importance but only a theoretical im-portance. As matters are, however, in view of almostuniversal lack of foresight, the relation has greater prac-tical than theoretical importance. The business man sup-poses he makes his contracts in a certain rate of interest,only to wake up later and find that, in terms of real goods,the rate is quite different.

The real rate of interest in the United States fromMarch to April, 1917, fell below minus 70 per cent! InGermany at the height of inflation, August to September,1923, the real rate of interest fell to the absurd level ofminus 99.9 per cent, which means that lenders lost allinterest and nearly all their capital as well; and then sud-denly prices were deflated and the real interest ratejumped to plus 100 per cent. 8

8 The need to show income and capital accounts in terms of valueinstead of money units is now coming to be recognized by progressiveaccountants. For a clear and complete statement of this new principle inaccounting, the reader is referred to Ernest F. DeBrul. UnintentionalFalsification of Accounts. National Association of Cost AccountantsBulletin, Vol. IX. Pp. 1035-1058. New York , National Association ofCost Accountants, 1928. The same theory is expounded by Henry W.Sweeney in his doctor’s dissertation, Stabilized Accounting, acceptedby Columbia University but not yet published. See also his article,German Inflation Accounting, in the Journal of Accountancy, February,1928, pp. 104-116; Dr. Walter Mahlberg . Bilanztechrdk und Bewertungbei Schwankender Wahrung. Leipzig, G. A. Gloeckner, 1923; E. Schmal-enbach. Grundlagen Dynamischer Bilanzlehre. Leipzig, G. A. Gloeckner,1925; Lucien Thomas. La Tenue des Comptabilites en Periode d’In-stability Monetaire. Paris, editions d’experta, 1927; Lucien Thomas.La Revision des Bilans a L’Issue de la Periode d’Instabilite Monetaire.Paris, editions d’experta, 1928. Also compare Dr. F. Schmidt, Die In-dustriekonjunktur—ein Rechenfehler! Zeitschrift fur Betriebswirtschaft ,Jahrg. 1927, and 1st Wertdnderung am ruhenden Vermogen Gewinn oderVerlustf, Zeitschrift fur Betriebswirtschaft , Jahrg. 1928.

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