in 1896 from his 2-1/2 per cent. One of the few
facts which seem to stand out clearly from a study of the movement of
the prices of securities, and consequently of the rate of interest to
be derived from them, is that the rate of interest is high when the
price of commodities is high, and vice versa. So that the answer to
the question: What is the rate of interest likely to be after the war?
may be given, in Quaker fashion, by another question: What will happen
to the index number of the prices of commodities? It seems fairly
probable that both these questions may be answered, very tentatively
and diffidently, by the expression of a hope that after a time, when
peace conditions have settled down and all the merchant ships of the
world have been restored to their peaceful occupations, the general
level of the price of commodities will be materially lower than it is
now, though probably considerably higher than it was before the war.
If this be so, then it is fairly safe to expect that the rate of
interest, as expressed in money, will follow the movement of prices of
goods. But it must be remembered that by rate of interest I mean the
pure rate of interest, that is to say, the rate earned on perpetual
fixed-charge securities of the highest class. It may be that, owing to
the very large amount of gilt-edged securities created in the course
of the war by the various warring Governments, the rate of profit to
be earned by the man who takes the risks of industry from dividends
on ordinary shares and stocks will have to be made relatively more
attractive than it was before the war.

If, then, capital can only be created by saving, how far will the war
have helped towards its more plentiful production?

Here, again, we are faced with a psychological question which can only
be answered by those who are bold enough to forecast the state of mind
in which the majority of people will find themselves when the war is
over. If there is a great reaction, and everybody's one desire is to
throw this nightmare of war off their chests and go back to the times
as they were before it happened, then all that the war has taught us
about the production of capital will have been wasted. But I rather
doubt whether this will be so. Saving merely means the diversion of
a certain proportion of the output of industry into the further
equipment of industry. The war has taught us lessons which, if we
use them aright, will help us to increase enormously