nt; and
when these demands are all satisfied, any additional capital offered on
loan can find an investment only by a reduction of the rate of interest.

The amount of borrowers being given, (and by the amount of borrowers is
here meant the aggregate sum which people are willing to borrow at some
given rate,) the rate of interest will depend upon the quantity of
capital owned by people who are unwilling or unable to engage in trade.
The circumstances which determine this, are, on the one hand, the degree
in which a taste for business, or an aversion to it, happens to be
prevalent among the classes possessed of property; and on the other
hand, the amount of the annual accumulation from the earnings of labour.
Those who accumulate from their wages, fees, or salaries, have, of
course, (speaking generally) no means of investing their savings except
by lending them to others: their occupations prevent them from personally
superintending any employment.

Upon these circumstances, then, the rate of interest depends, the amount
of borrowers being given. And the counter-proposition equally holds,
that, the above circumstances being given, the rate of interest depends
upon the amount of borrowers.

Suppose, for example, that when the rate of interest has adjusted itself
to the existing state of the circumstances which affect the disposition
to borrow and to lend, a war breaks out, which induces government, for
a series of years, to borrow annually a large sum of money. During the
whole of this period, the rate of interest will remain considerably
above what it was before, and what it will be afterwards.

Before the commencement of the supposed war, all persons who were
disposed to lend at the then rate of interest, had found borrowers, and
their capital was invested. This may be assumed; for if any capital had
been seeking for a borrower at the existing rate of interest, and unable
to find one, its owner would have offered it at a rate slightly below
the existing rate. He would, for instance, have bought into the funds,
at a slight advance of price; and thus set at liberty the capital of
some fundholder, who, the funds yielding a lower interest, would have
been obliged to accept a lower interest from individuals.

Since, then, all who were willing to lend their capital at the market
rate, have already lent it, Government will not be able to borrow unless
by offering higher interest. Though, with the existing habits of the
po