TWO AND A HALF PER CENT. 35 3 



West, virgin forests, prairies, and mines offer as splendid oppor- 

 tunities to enterprise as enterprise has ever known ; so far, there- 

 fore, the demand for capital to develop these new resources will 

 tend to raise, or at least to conserve, the rate of interest. While 

 this is true, it must be remembered that a given amount of capi- 

 tal is more efficient now than it ever was, that its efficiency in- 

 creases ; which means lessened demand for it, tending to reduce 

 the terms paid for its use unless new and profitable applications 

 of capital can be made. As invention after invention is perfected 

 and introduced, the outlay for machinery required to make a 

 million pairs of shoes steadily diminishes. Quick and cheap 

 railroad transportation enables a country merchant to keep his 

 stock at a minimum by constantly " sorting-up " reducing the 

 capital needed for his business. Telegraphic purchases and pay- 

 ments now exclude the necessity for locking up capital while 

 correspondence goes on through the post-office. In the vast 

 stores of capital, set free in these and similar ways, arrives the 

 opportunity for inventiveness, taste, and skill to create new wants, 

 to supply them and some old wants as well which have long gone 

 hungry to increase the quantity and improve the quality of life. 

 In so far as such new applications of capital are not commercially 

 reproductive, they tend to maintain the rate of interest. 



Next, as to security in investment. During recent years there 

 has been an immense growth of American capital in the hands of 

 people unable or unwilling to superintend its application in busi- 

 ness, people in the main desirous of thorough security in their 

 investments many of them executors and trustees. Financiers 

 have not failed to observe this state of things ; it has enabled them 

 to obtain vast loans at comparatively low and diminishing rates. 

 Of late years have appeared innumerable issues of bonds, debent- 

 ures, and mortgages ; covering not only railroad property, but 

 mills, elevators, apartment - houses, office and club buildings. 

 When the loans obtained by these wholesale borrowings have 

 been remuneratively applied, the result has been all that the 

 lenders could wish. But, unfortunately, the securities which 

 warrant a buyer in dismissing caution and the necessity for dis- 

 crimination are few indeed. The popularity of coupon bonds has 

 extended from those of a substantial description to many of little 

 or no value. During the year ending June 30, 1888, twenty-one 

 per cent of the bonds outstanding on American railroads paid no 

 interest ; the capital involved being no less a sum than eight hun- 

 dred and twenty-seven million dollars. Of allied significance is 

 the fact that in 1888 one in every ninety-eight firms in business in 

 the United States became insolvent. Despite improved methods 

 of transacting business, of estimating credits through mercantile 

 agencies, there persists an overtrading which burdens the com- 



