SOME ILLUSTRATIVE FACTS

abroad is not practicable, other methods of adding topresent at the expense of future income may be found.If such processes go far enough they will result in adissipation of capital, or in a slower accumulation ofcapital.

Contrariwise, the causes which work toward lendingmay result, if lending is impracticable, in some otherways of postponing consumption, and may show them-selves in a more rapid accumulation or in a less rapiddissipation of capital.

The same economic causes which tend to make interesthigh will tend also to encourage the production of the lesssubstantial and durable instruments, whereas thosecauses which tend to make interest low will favor theproduction of instruments of the more durable and sub-stantial types.

In general, high interest, borrowing, dissipation ofcapital, and perishability of instruments go together.Any cause which produces any one of the four will, ingeneral, tend also to produce the other three. Likewiselow interest, lending, accumulation, and durability ofinstruments, generally go together.

The theory enunciated is that the rate of interest de-pends on impatience and investment opportunity. Asany cause increases or decreases our impatience for im-mediate income, it tends to increase or decrease the rateof interest. Any cause which increases our opportunityto secure returns on investments in excess of the exist-ing rate of return tends to increase the rate of interest;and conversely when, for any cause, opportunities to in-vest promise only returns less than the existing return oninvestment the interest rate tends to decline.

In Chapter IV were enumerated the causes which in

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