568 THE POPULAR SCIENCE MONTHLY 



of the needed ability will not enter the various important positions. 

 In the meanwhile, however, the masses of salaried men, all more or less 

 especially trained experts, can not escape the unwarranted losses. They 

 can not leave their employment for lack of training to enter another. 

 They have to submit to losses that are unearned, when for the most 

 part they have deserved better of the public. 



4. Persons and institutions with their capital invested in loans have 

 found themselves gradually worse off as prices have advanced. This 

 proposition is particularly true of long-time loans, made either before 

 or early in the upward swing of prices. Obviously both principal and 

 interest were fixed once for all in the loan contract. Consequently, as 

 prices have gone up, the lender received less and less purchasing power 

 in the form of interest, and at maturity of the loan he had also the 

 principal returned to him in depreciated dollars. Prices having 

 advanced on the average about three per cent, a year, he should properly 

 have received also three per cent, a year additional interest money, and 

 he should get back now, not the number of dollars lent, but 50 per 

 cent, more, to offset the decline in the purchasing power of the dollar. 



Specifically, if in 1897 a person lent $1,000 for fifteen years at 

 four per cent, interest, he should have received $41.20 interest for the 

 first year, $42.45 the second, $43.72 the third, and so an increase of 

 about three per cent, a year through the period; likewise now, in get- 

 ting back the principal, he should receive not $1,000, but $1,500. 

 Obviously he has lost, and the borrower has made the corresponding 

 gain. The point is, loss and gain were unforeseen and were not con- 

 templated in the loan contract. 



We have here a large class of losers, including owners of govern- 

 ment, municipal, railway and other bonds, mortgage notes, fixed 

 annuities, and similar forms of investments. Among persons, the class 

 includes widows and orphans, people with savings for old age, profes- 

 sional men seeking safe places for their surplus income, and business 

 men retired from active enterprise. Among institutions, there are 

 endowed hospitals, charitable organizations, colleges and universities. 

 In general, the class includes only cautious investors, who, so far as 

 possible, seek to eliminate risk from their incomes. Their caution has 

 been rewarded by losses. A virtue which is not too plentiful among 

 investing classes has received rather discouraging setbacks. 



For loans made in recent years, especially for short time periods, 

 there has been some compensation for the loss of purchasing power. 

 Since 1900 interest rates have averaged from one to two per cent, 

 higher than normal. This extra rate has in part, but not altogether, 

 offset the average annual rise in prices. The interest rate is now five 



