ssessors of disposable capital, an increased number cannot be found
who are willing to lend at the existing rate, there are doubtless some
who will be induced to lend by the temptation of a higher rate. The same
temptation will also induce some persons to invest, in the purchase of
the new stock, what they would otherwise have expended unproductively in
increasing their establishments, or productively, in improving their
estates. The rate of interest will rise just sufficiently to call forth
an increase of lenders to the amount required.

This we apprehend to be the cause why the rate of interest in this
country was so high as it is well known to have been during the last
war. It is, therefore, by no means to be inferred, as some have done,
that the general rate of profits was unusually high during the same
period, because interest was so. Supposing the rate of profits to have
been precisely the same during the war, as before or after it, the rate
of interest would nevertheless have risen, from the causes and in the
manner above described.

The practical use of the preceding investigation is, to moderate the
confidence with which inferences are frequently drawn with respect to
the rate of profit from evidence regarding the rate of interest; and to
shew that although the rate of profit is one of the elements which
combine to determine the rate of interest, the latter is also acted upon
by causes peculiar to itself, and may either rise or fall, both
temporarily and permanently, while the general rate of profits remains
unchanged.

* * * * *

The introduction of banks, which perform the function of lenders and
loan-brokers, with or without that of issuers of paper-money, produces
some further anomalies in the rate of interest, which have not, so far
as we are aware, been hitherto brought within the pale of exact science.

If bankers were merely a class of middlemen between the lender and the
borrower; if they merely received deposits of capital from those who had
it lying unemployed in their hands, and lent this, together with their
own capital, to the productive classes, receiving interest for it, and
paying interest in their turn to those who had placed capital in their
hands; the effect of the operations of banking on the rate of interest
would be to lower it in some slight degree. The banker receives and
collects together sums of money much too small, when taken individually,
to rend