THE THEORY OF INTEREST

dividual mortgages will be higher than the rate of inter-est on more marketable securities. It is, in general, advan-tageous to have stock listed on the stock exchange, for,being thus widely known, should the necessity to sellarise, such a stock will find a more ready market.

The most salable of all properties is, of course, money;and as Karl Menger pointed out, it is precisely this sala-bility which makes it money. The convenience of surelybeing able, without any previous preparation, to disposeof it for any exchange, in other words, its liquidity, is it-self a sufficient return upon the capital which a man seemsto keep idle in money form. This liquidity of our cash bal-ance takes the place of any rate of interest in the ordinarysense of the word. A man who keeps an average cashbalance of $100, rather than put his money in a savingsbank to yield him $5 a year, does so because of its liquid-ity. Its readiness for use at a moment’s notice is, to him,worth at least $5 a year. There is a certain experiencedbuyer and seller of forests, in Michigan, who makes apractice of keeping a ready cash balance in banks of sev-eral million dollars in order better to be able to competewith other forest purchasers by having available spotcash to offer some forest owner who, becoming forest-poor, wishes to sell. Forests are extremely non-liquidwhile cash balances are extremely liquid.

§6. General Income Risks

Even when there is no risk (humanly speaking) in theloan itself, the rate realized on it is affected by risk inother connections. The uncertainty of life itself casts ashadow on every business transaction into which timeenters. Uncertainty of human life increases the rate ofpreference for present over future income for many peo-

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