THE THEORY OF INTEREST

habitants are increasing, the rate of interest will behigh, that when they are decreasing, the rate of interestwill be low, and that when they alternate from one con-dition to the other, the rate of interest will alternatealso in accordance with the period of the loan.

The most striking examples of increasing incomestreams are found in new countries. It may be said thatbefore the World War the United States almost alwaysbelonged to this category. Were it possible to expressby exact statistics or diagrams the size of American in-comes, they would undoubtedly show a steady increasesince colonial days. Statistics almost equivalent to thesedesiderata are available (though not very accurate) inthe form of the United States Census figures of percapita wealth, as well as in statistics of production andconsumption of staple commodities and of exports andimports. These, combined with common observation andthe statements of historians, lead to the conclusion thatAmerican incomes have been on the increase for twohundred years. It is also true that during this periodof rising incomes the rate of interest has been high. Thesimplest interpretation of these facts is that Americans ,being constantly under the influence of great expecta-tions from the exploitation of great natural resources,have been always ready to promise a relatively large partof their abundant prospective future income for a rela-tively small addition to their present, just as he whoexpects soon to come into a fortune wishes to anticipateits realization by contracting a loan.

Not only has the rate of interest been high in America as compared with other countries during this period ofascending incomes, but some of the other conditionshaving the same significance as a high rate of interest

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