THE THEORY OF INTEREST

rates even though income streams continue to increase.The rate of interest consequently dropped from 11 percent to 6 per cent. 18

The same phenomena of enormous interest rates werealso exemplified in Colorado and the Klondike. Therewere many instances in both these places during thetransition period from poverty to affluence, when loanswere contracted at over 50 per cent per annum, and theborrowers regarded themselves as lucky to get rates solow. It was also conspicuously true that the first build-ings and apparatus constructed in these regions were veryunsubstantial. Rude board cabins were put up in a day.Thus, high interest, borrowing, and unsubstantial capitalwere the phenomena which attended these communitieswhen undergoing their rapid expansion.

In Nevada in the seventies, when the mines were in-creasing their product and the income of the inhabitantswas tending upwards, the rate of interest was high andthe people in debt. The bonded state debt itself amountedto $500,000 and drew 15 per cent interest. 19 In the nextdecade all these conditions were reversed. The mines wereon the decline, 20 the rate of interest fell, and the stateand territorial debts were largely paid off. 21 The fall ofthe rate of interest in this case could not have been dueto the introduction of loans from outside, except so faras old debts were refunded at lower rates; fresh loanswere seldom made, as the state had ceased to be a goodplace for new investments. At about the beginning ofthis century, new Nevada mines in the gold-field region

“ Plehn, p. 353.

“ See Message of the Governor of the State of Nevada, 1879.

* Mines and Quarries, 1902. Special Report U. S. Census, p. 255.

“See later Messages of the Governor of the State of Nevada.

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