THE THEORY OF INTEREST

before may equally well represent these operations. Aman sells the income stream ABCD (Chart 5) and withthe proceeds buys the stream EBD. The X' and X" are,as before, $100 and $105, but now appear explicitly asdifferences in the value of two income streams, insteadof appearing as direct loans and payments.

§6. Interest Ineradicable

Thus interest taking cannot be prevented by prohibit-ing loan contracts. To forbid the particular form of salecalled a loan contract would leave possible other formsof sale, and, as was shown in Chapter I, the mere act ofvaluation of every property right involves an implicitrate of interest. If the prohibition left individuals free todeal in bonds, it is clear that they would still virtuallybe borrowing and lending, but under the names of sellingand purchasing; and if bonds were tabooed, they couldchange to preferred stock. Indeed, as long as buying andselling of any kind were permitted, the virtual effect oflending and borrowing would be retained. The possessorof a forest of young trees, not being able to mortgagetheir future return and being in need of an income streamof a less deferred type than that receivable from theforest itself, could simply sell his forest and with theproceeds buy, say, a farm, with a uniform flow of income,or a mine with a decreasing one. On the other hand, thepossessor of a capital which is depreciating, that is, whichrepresents an income stream great now but steadily de-clining, and who is eager to have an increasing income,could sell his depreciating wealth and invest the proceedsin such instruments as the forest already mentioned.

It was in such a way, as for instance by rent purchase,that the medieval prohibitions of usury were rendered

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