Thus far, then, Jevons and Bohm-Bawerk. But now let us put the problem of Interest on our wheel, as we have already done that of Value, and see whether the solution it yields will prove any more satisfactory, or be more in consonance with the knowledge and experience of men.

To begin with, then, we may premise that the game of the industrial world is money-getting, and quite as much so in the case of those who have money to lend as of those engaged in definite industrial operations. And with this we may further observe that there is in every industrial community always a certain amount of free money, very elastic in quantity, ready to be loaned on interest, and varying in its amount according to the security offered for its repayment when balanced against the abstinence entailed on the lender in parting with it. Now if these separate sums of money scattered about in the hands of separate individuals were without any mechanism to collect, organize, and negotiate them, it is probable that the rate of interest received by each of their scattered holders would vary according to local and accidental circumstances, and be high, low, or altogether non-existent, as the case may be. But it so happens that there is a central organized market for these scattered rivulets, namely the bankers, brokers, and other money dealers on the axle of our wheel, whose function it is to register, and in part determine, what the general rate of interest on money shall be, in the same way as, on this same axle, there are dealers for every other species of industrial commodity.

And the first point we have to determine is:- What is it on which these money dealers keep their eye in forecasting the fluctuations in the rate of interest, - if, that is to say, we are to get at the causes which give rise to Interest, - for he who knows the causes operating in the fluctuations of a thing has come very near to the causes of the thing itself. And these may be summed up, so far as the bankers and money dealers are concerned, in the one consideration of the supply and demand of money at the existing market rate. In a word, it is in the relation between the quantity or pace at which money is thrown on one side of the wheel by lenders, and the quantity or pace at which it is taken off by borrowers, on the other, that the fluctuations in the rate of interest are to be found, - just in the same way as the fluctuations in the value of any other commodity, - and so it need no longer detain us here, as we have already discussed it in our last chapter.

So far well, but, as in the parallel case of Value, what we want specially to get at is the cause of the general rate of Interest around which these fluctuations revolve - the reason, for example, why in one country this general rate is, say, 5 per cent., in another country 10 per cent., or why in one industrial age or epoch of the same country the general rate is 10 per cent., and in the next age only 5, and so on. And for this we must pursue our investigations a little farther, and in doing so, the first and most obvious thing that strikes us is, that it must be a relation between the degree of security, on the one hand, of which the lender is assured, and on the other, the profit that can be made out of the loan by the borrower; a knowledge of both of which is possessed by the men in the central exchanges; - not by the bankers and money lenders alone, nor by the dealers in industrial commodities, as coal, iron, corn, cotton, etc., alone, but by both combined, - as is seen in the anxiety shown on the one hand by the money lenders in critical times to know the state of the crops, the likelihood of the forthcoming supplies of all kinds of industrial products, as well as of any political complications on the horizon, etc.; and the parallel anxiety of the industrial exchanges to know the general state of the money market on the other.

But one thing is certain, and that is, that it is not from either of the above mentioned factors separately, that a definite rate of interest can arise. Not from the question of risk or security, even when there is added to it the disagreeableness or disinclination to part with money for a time; for many loans are equally secure even when the purposes to which they are to be put vary from the most to the least profitable enterprises.

Not from the profits; for whether those who borrow the money make a hundred per cent, profit or only 10 per cent, out of it, they all alike can borrow it at, say, a uniform rate of

5 per cent. The rate of interest in general, then, can only come from a relation between the 'marginal,' or lowest, rate of profit from industrial investments which is usual at the time, on the one hand, and the stiffest or 'marginal' sticklers for safety and security, on the other; rising with the marginal increase of productivity when the security is fixed, and falling with the marginal increase of security when the productivity is fixed; the relation being identical in principle with what we saw was the case in determining the value of any other commodity. But still, this does not answer the question as to how this definite rate or market-price of money is to be determined. The answer is, in the same way as every other market-price is determined, namely by actually putting the money on the wheel, where it will come into touch with the feelers of the central money exchanges both when thrown on the one side of the wheel by lenders, and when taken off on the other side again by borrowers; and where the movement and balance of the wheel itself, whose two sides must keep time and step with each other, will, like a millstone, grind down each separate increment or contribution thrown on to it, to a common and definite uniformity of rate, varying from day to day according to the quantity or rapidity with which it is thrown on and taken off; and that, too, quite independently of the infinity of psychological or business inducements which may have called forth the supply and the demand in each particular instance; every fluctuation in the rate hanging on to the skirts of the rate immediately preceding it, and none being altogether independent, capricious, or casual; - and all alike forming successive links in a continuous and unbroken chain of orderly and regulated development: the industrial products with their values, the money with its interest, together with the credit notes, bills of exchange, and all collaterals which cling to and attend them, all whirling round and round the wheel from its production to its consumption side, and keeping time and step together.