The Anaconda standard., 1899-11-27
TEN PAGES.


upon which there is more mis-
conception, even among people
generally we'll informed upon other
matters. than interest rates as affected
by the abundance or scarcity of
money.
In discussions of the money question
nothing is more common than to hear
men say that they want the supply Of
money increased so as to bring down
the rate of interest 1t is just about as
common. to hear others declare that
there is an abundance of money and
essay to prove it by pointing to the low
rates of interest upon government
bonds and other gilt-edged securities.
The economic fact is, that as a broad
general proposition, low interest rates
indicate that the supply of money is
inadequate for active and profitable
business, and that to increase the sup
ply of money will raise the rate In
this respect money differs entirely from
food or any article of prime necessity
which people must have and which rise
in price as they become scarce.
When money is borrowed it is for the
purpose of being used in some bust
ness transaction, and, as rule. this
will not be done unless there is profit
Yin doing it. We are not speaking now
of those exceptional cases in which men
must have money to save themselves
from ruin, but of the great mass of
transactions in which money is Dor
trowed for the purpose of investment.
When money is scarce, prices begin to
fall and the profits of business enter
lprises are diminished. Consequently
fhe business man cannot afford to pay
$50 much for the money that he needs
The scarcer the money becomes the
Hover the prices fall, and finally the
profits entirely disappear. Then he
either fails or goes out of business in
order to avoid loss. Other men do the
same thing. there is great dearth of
borrowers, and the bulk of the money
naturally gravitates to the great cities
where there are supposed to be better
opportunities for loaning it. Money be-
comes superabundant at those points
tQuite generally under such conditions
1T becomes dangerous to loan it to busi-
ness men because with prices falling,
they may not be able to pay it back
Hence. rather than have it lie idle or
take dangerous risks the owners of
money will invest it at low rates in
bonds or other securities believed to b4
entirely safe.
On the surface it looks as if there
sHas too much money, and so there is at
a few points where it is thus congested.
hut the rest of the country, or the
world 1t may be- is almost starving for
the want of it. In other words at a
given time there may be too much
snoney in New York for profitable in
Sestment there but if it We're dis
tributed all over the country there
would not be enough of it to keep up
prices, insure legitimate profits and
enable business men to pay fair rates
of interest.
This is not mere theory, but it is in
accordance with the worlds experience.
When the gold discoveries of California
and Australia We're made, in 4 very
short time the worlds stock of money
was enormously increased, but interest
did not fall. On the contrary, it rose
fboth in Europe and America. In 1850
DIT was very much higher than it was
in 1885 and 1910, when the money supply
was at low ebb.
1t is matter of common knowledge
among old residents of the Pacific coast.
that in early days when gold was be-
ing poured out like water from the
mines of California, interest in that
state ranged from two per cent to six
per cent a month, and even higher.
Such rates We're not paid because peo-
pie were in distress. Quite the reverse.
They were willing to pay almost any
thing in order to get it, because they
,ssuld invest it and realize vasts profits