SOME ILLUSTRATIVE FACTS

time to decrease that on safe loans. This proposition isnot familiar to most persons. It has usually caused sur-prise that during a time of political stress and dan-ger the rates of interest on perfectly safe loans werefound to be so small. Many such instances may be cited.At certain periods during the Civil War when the greatestuncertainty prevailed loans with good security were con-tracted at nominal rates, and bank deposits tended toaccumulate for lack of sufficient outlet in secure invest-ments. The same conditions existed in Europe duringthe World War. Times in which public confidence isshaken are characterized not only by high rates on un-safe loans, but by efforts on the part of timid investorsto find a safe place for their savings, even if they haveto sacrifice some or all of the interest upon them. Theywill even hoard savings in stockings and safe depositvaults. We may even occasionally find cases in which thedesire to obtain a safe method of keeping capital is sokeen and so difficult to satisfy that the rate of interest isnegative. The investor is then thankful enough to receivethe assurance that his capital, by being intrusted toanother, will not be diminished, to say nothing of beingincreased.

§6. Examples of Influence of Time Shape

We still need to exemplify the most essential part ofthe theory, namely, that the rate of interest dependsthrough the rate of impatience upon the time shape ofthe income stream. The time shape may be due eitherto natural or artificial causes, or to choice because of ahigh or low rate of return on investment. If the theoryis correct, we should find, other things being equal, thatwhen in any community the income streams of its in-

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