THE THEORY OF INTEREST

of a fall predominated in varying degrees over the hopeof a rise.

The year 1890 was one of great disturbance in ex-changes, the average for the first six months being 17.6and for the last six months, 19.3. The gold price of thesilver bonds rose from an average for the first six monthsof 73.8 to 83.5 for the last six months, but the rise intheir silver price was only from 100.6 to 103.7, showingthat the increase of confidence in the future of silverwas not great, and, in fact, only reduced the disparity inthe interest from 1.0 to .8 per cent.

This great rise in exchange and the slight revival insilver securities occurred simultaneously with the passageof the Sherman Act of July, 1890, by which the UnitedStates was to purchase four and a half million ounces ofsilver per month. The disturbance was doubtless due insome measure to the operation, or expected operation, ofthat law.

This is not the only case in which the relative pricesof rupee paper and gold bonds were probably affectedby political action. One of the smallest differences in thetwo rates occurs in 1878, which was the year of the BlandAct and of the first International Monetary Conference.

After the closure of the Indian mints to silver onJune 26, 1893, exchange rose from 14.7 to 15.9, the goldprice of rupee paper from 62 to 70, and consequently itsrupee price from 101.2 to 105.7.

From this point the exchange again dropped, much tothe mystification of those who had predicted an estab-lished parity between gold and silver at the new legalrate of 16d per rupee. There was much discussion as tothe reasons for the failure of the legal rate to becomeoperative. The chief reason seems to have been that the

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