PERSONAL AND BUSINESS LOANS

tion is precisely the same, namely, to rectify the timeshape of the income stream.

In Wall Street and other speculative centers a typeof loan known as the call loan is common, subject to re-demption at the pleasure of the lender or the borrower,and used by the speculator for the purchase of securities.The speculator borrows when he wishes to buy and re-pays when he has sold, and by adroitly arranging andplacing his loans he prevents the sudden draining orflushing of his income stream which these purchases andsales would otherwise involve, if they were to be madeat all.

In all the cases which have been described, the loangrows out of a purchase or group of purchases, and sincethe tendency of every purchase is to decrease one’s in-come, and of every sale to increase it, it is clear thatloans contracted for a purchase and extinguished by asale may be said to have as their function the oblitera-tion of these decreases and increases of the incomestream. We see then that these commercial loans fit intothe impatience part of the theory of interest which hasbeen propounded.

§4. Long Term Loans

The second class of business loans is that of long termloans or permanent investments. In this class are placedmortgages, whether on farms or on urban real estate.As shown by the 1890 Census, almost two-thirds of farmmortgages are contracted to buy land, and the remainderprincipally for improving it, or for the purchase of farmmachinery and animals, or for the purchase of otherdurable wealth and property. The Department of Agri-culture found that 87 per cent of the mortgages of 94

[363]