Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1896-07-22

gotiate loans money is said to be
scarce. Now, from these premises it
is perhaps not unnatural to conclude
that stringency in the loan market
can only be relieved by an increase in
the supply of money. But the pre-
misses are wrong, as we will proceed
to show. We do not deny that in the
transactions in the loan market money
is sometimes actually used. Men do
sometimes actually borrow and lend
money. Nevertheless the fact is in
controvertible that the great majority
of these transactions are accomplished
without the intervention of money at
all. Walker says: Il do not believe
that two per cent. of the discounted
paper in New York to-day was given
for money paid Ask the business
men of Watertown who are accustomed
to discount their notes at the banks,
ask the bankers who make the loans,
whether the actual money is passed
over the counter, and in at least nine
| out of ten cases the answer will be no.
Now, if SO large portion of the trans
actions in the loan market take place
without the use of money, it must be
that it is not money which is the essen
| tial factor, but something else which
is expressed in terms of money. This
| is the case, and that something is cap
| ital, and it's transfer is made through
tne use of some of the instruments Of
credit, notes, checks, drafts, bills Of
exchange. The aggregate of capital
available for loans we call the loan
able or floating capital.
From the foregoing we may be able
| to see how much of truth there is in
the common inference that money is
plenty or scarce accordingly as loans
are easy or difficult to negotiate, and
that stringency Of the loan market
needs more money for its relief. 1t is
true that particular locality may
| have, temporarily, an Inadequate sup
ply Of money, since money is some
times employed in the transfer OF cap
ital and in the payment of maturing
obligations. Such a condition would
| probably cause a temporary sJringe
|
But this condition is by no means tn
common cause of such stringency, aaG
we ought never to infer a scarcity CT
money from the difficulty Of obtaining
loans. The difficulty may arise from
an inadequate supply of l0anable cap
tai, not money. The demand for cap
ital may be in excess Of the supply.
Or, it may arise from inadequacy Of
security, lack of confidence, genera
monetary disturbance.
Another common error arises il the
use of the term, value Of money.
It is often used in the sense OF in
terest. Now value Of money is o.e
thing, and interest is another an,
quite different thing, and using on
as the synonym of the other leads a
most inevitably to confusion G.
thought The value of money is ii
purchasing power, the quantities
commodities for which it can be e.
changed. Interest is what is paid fC
the use of wealth, generally for til
use of capital. Interest may or ma.
not be paid in money. In any case
Is something entirely distinct t"eM
the value of money. Value of none
and rate OF interest vary, but they c
not necessarily vary directly nor eve
simultaneously We may have hig
value of money at the same time vii
a low rate of interest, and low yalu
of money with high rate Of interes,
and a variation may occur in O.
when there is no variation in til
other.
We have now Disseminated be w
money proper, money IL the sense
wealth. and money IN the sense Of loan
able capital, and between value {
money and interest. In the next art
Gle we will treat of the functions
money and the qualities which fit
to perform those functions.