of superintendence, perhaps, not much greater than elsewhere, the market rate is due almost entirely to risk and taxes, which in that country at the present time are both high and fluctuating. In the United States the increase of the means of subsistence is probably about 33 per cent., whilst risk, taxes on loans of money, and cost of superintendence combined, probably amount to about 13 per cent. more, making the average market rate about 5 per cent.

While temporary and local circumstances combine to greatly modify the market rate, it is of the highest importance to know of what elements this market rate consists, in order to be able to accord to each modifying circumstance its due degree of importance. For this reason the analysis of interest herein made, besides being otherwise necessary to the design of the present work, will, it is hoped, prove to be of immediate and practical use to all persons connected with monetary transactions.

It may be affirmed with safety that generally throughout the commercial world the market rate of interest at the present time has a tendency to fall; and it is a knowledge of this fact on the part of financiers and capitalists that renders long loans under permanent and equitable governments, and upon good security, more desirable, and therefore more valuable, than short ones. Ignorance of this fact on the part of the finance ministers of the United States has cost that country during the past twenty years nearly as much as the whole present sum of the public debt. How much it has cost in the equality of fortune and welfare of its citizens would be difficult to compute.

After proving that, teleologically, interest arises from the rate of the increase of animals and plants, and is therefore founded upon the provisions of nature for the development of organised life, it need hardly be said that usury laws, though doubtless often enacted with benevolent intentions, have the defect of being at variance with the laws of nature, and therefore cannot be maintained during eras of societary growth and progress.

CHAPTER XI.

RATE AT WHICH EXCHANGES INCREASE.

Exchanges differ essentially in frequency-Their frequency indicated by the customary rates of profit attached to each class-They are all reducible to one denomination of frequency-When thus reduced it will be found that competition has compelled them all to bear the same rate of profit-That rate is the one at which all the capital in a country augments-The latter is identical with the net rate of interest for money-Given the net rate of interest in a given country, the following rates can be deduced: the average rate of the augmentation of all capital: the net rate of profit on all exchanges reduced to one denomination of frequency: and the net profit on each class of exchanges whose order of frequency is given.

IN

N great commercial countries the exchanges of capital are so numerous and diversified as to have hitherto discouraged analysis and arrangement. Writers on the subject have been content to allude to them collectively as the Exchanges, or the Volume of Exchanges. It is evident that no progress can be made in determining their relation to capital or to money until a more critical and scientific method of treatment is adopted.

The primary and most essential difference between one exchange and another is its ratio of activity or occurrence in time. One important class of exchanges-for example, the first sales of live stock, agricultural products, lumber, naval stores, fish, game, etc.—are comparatively infrequent. They wait upon the seasons, and, for the most part, only

occur once a year. Another important class-as the commercial sales of corn, cotton, wool, sugar, tea, coffee, etc.— are comparatively frequent. From producer to consumer, these commodities pass rapidly through many hands, and each time at a profit.

Between these two great classes of exchanges-agricultural and commercial sales-there are numerous others, each of a different degree of frequency. Beyond them there are yet others.1

It being assumed that, in the long run, the net annual profits upon capital in all industries, whether productive or commercial, and in all classes of exchanges after making allowance for losses, bad debts, cost of superintendence, risks, deteriorations, taxes, rents, expenses, etc. are brought by competition to the same level, it follows that the average frequency of any given class of exchanges is indicated by the rate of profit which they commonly yield.

Thus, if the ordinary net rate of profit on first sales of

1 In 1866, whilst Director of the Bureau of Statistics, I made an effort to ascertain the frequency of land sales or conveyances, by requesting the county clerks, registrars, and recorders throughout the various States of the American Union to forward returns of the deeds which were placed on record in their offices from time to time; but the work of collating these returns proved to be too great for the small clerical force which could be spared from my office for the purpose; and it had to be abandoned. Over 150 of the returns-the first of the sort ever collected or published-will be found in my official report for November, 1866, pp. 13, 14. One of the fruits of this effort is the custom which has since grown up of the county clerks, registrars, and recorders to publish lists of conveyances and the terms of sale in the newspapers.

agricultural products is 5 per cent., and such exchanges of capital occur on the average only once a year, it follows that where the usual net rate of profit is 25 per cent., as, let us suppose, it is upon the sales of retail stocks of dry goods or draperies, the exchanges of the last named class of capital must occur half-yearly. In other words, while the agriculturist "turns" his capital stock over once a year the great London or New York tradesman "turns" his over twice. By a parity of reasoning, the banker or broker whose profits on each transaction may be so small as one-sixtyfourth part of one per cent. must, to make it pay," turn his capital over once a day.

It will be seen from these examples that no matter how numerous and diversified the exchanges are, they can all be brought to one denomination of frequency. When thus reduced it will be found that competition has brought them all to the same level of net profit.

The following hypothetical table will show more clearly the relation between frequency of exchange and rates of profit :