THE THEORY OF INTEREST

price level, translate the actual rates in terms of moneyinto real rates, and compare successive periods. Suchcomparisons are not very satisfactory, since no twoperiods, not even successive periods, are so alike indus-trially that we can say that they differ only as to thestate of the monetary standard as reflected in the in-dex numbers of prices. Of course, influences other thanchanges in money affect interest rates.

Detailed tables showing the average annual rate ofchange in the commodity price level, 7 the rates of moneyinterest, and the rates of real interest for London, NewYork, Berlin, Paris, Calcutta, and Tokyo are given inbasic tables in the Appendix to this chapter. Wholesalecommodity prices were used in computing these ratesalthough cost of living indexes would have been prefer-able for this purpose and more in harmony with mytheory of income. But cost of living indexes do not existfor the period covered.

Chart 42 shows the annual rate of change in the com-modity price level (upper part) compared with themarket rates of interest (lower part) in the London mar-ket over the period 1825 to 1927. The chart also givesthe real rate by a dotted line, but this may, for thepresent, be overlooked.

It will be observed that the entire period is broken upinto sub-periods, which conform to rather definite andsuccessively contrasted price movements. These sub-periods were allowed to choose themselves, so to say.That is, they were so chosen that each period should showa rather distinct change in the rate of price change ascompared with the preceding and succeeding periods.

’The basic tables for computing the rate of price changes and themethod of computation are given in the Appendix to this chapter §1.

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