TWO AND A HALF PER CENT. 35 i 



Pacific Railway Company, is quoted at 123 ; certain other of its 

 bonds, equally well secured, but payable in 1937, are quoted at 

 110 ; both bear five per cent. Investors of the wealthiest class pre- 

 fer investments which, while absolutely secure, may be subscribed 

 for in blocks of a quarter to a round million a desideratum which 

 further restricts their choice. An electric current may be so in- 

 tense as to become an obstacle in its own path ; a vast volume of 

 capital in the hands of an individual has somewhat the same effect. 

 While the rate of interest on Government bonds, and city and 

 railroad debentures has been steadily falling within the past two 

 decades, the rates payable on real-estate mortgages have declined 

 in sympathy. This year, in New York and Boston, liens on the 

 best city property have been placed at four per cent, two per cent 

 less than the rates current in 1869. In other large cities of the 

 Union a similar decline is observable ; and, as between newly set- 

 tled States and Territories and the financial centers of the nation, 

 the disparity in the rates payable on well-secured loans is much 

 less to-day than it was twenty years ago. The significant point 

 in the matter under consideration is not so much that the rate of 

 interest has been falling as that interest has become distinctly 

 separated from the wages of superintendence and the premium for 

 incurred risk, which used to be combined with it. The return on a 

 Government bond represents the bare remuneration of capital em- 

 ployed, without hazard or care. An investor in first-class city 

 mortgages receives a larger income than if he had bought Govern- 

 ment bonds with his money, but he has not so easy a time of it. He 

 must have titles carefully and responsibly examined ; his credit- 

 ors may be unpunctual ; occasionally he may have the trouble of 

 a foreclosure on his hands. His investments are for comparative- 

 ly short terms of years, and, between one investment and another, 

 part of his capital may be unproductive; or, in reinvesting, he 

 may be obliged to accept a reduced rate. Hence the competition 

 for securities eliminating hazard and bother, which is one of the 

 notable facts in the modern world of finance. Many causes have 

 been at work in bringing down the return on a New York debent- 

 ure to five eighths as much as can be obtained on a Fifth Avenue 

 or Broadway mortgage. First of all, of course, must count the 

 enormous growth of American wealth within recent years ; and, 

 next, the fact that a good deal of it is in the hands of compara- 

 tively few men. A multi-millionaire's income, even at the lowest 

 current percentage, is so much more than his outgo that, if he can 

 be relieved from care and anxiety in looking after his possessions, 

 he is often content to buy securities paying but half as well as the 

 best properties did twenty years since. Another prime cause for 

 the fact under notice is the steady approximation to European 

 rates of interest which has been going on since the close of the 



