FARM CREDIT AND THE RATE OF INTEREST 187 



mium in the form of interest for doing so. There are others who 

 would not save even if the rate of interest were very high. 

 With people as they are at a given time, the amount of saving 

 will depend upon the extent to which the present wants seem 

 more important than future wants and by the premium offered 

 in the form of interest to counterbalance this greater present 

 importance. 



It has been shown why funds are useful and why they are 

 scarce. Hence a market value is placed upon their use; this 

 market value expressed in terms of money is the interest charge. 

 The rate of interest at any given time is determined by the 

 opportunities for productive enterprises and the number and 

 energy of the men who want funds for this and other purposes, 

 that is, the intensity of the demand for funds, the abundance 

 of funds, and the relative importance of present and future 

 wants in the minds of potential lenders. In other words, 

 price-determining forces work here as elsewhere. 



Why is the rate of interest different at different places at the 

 same time, and with different people at the same time and place ? 

 That is, why is the rate of interest not uniform at all places 

 and on all loans ? 



Unevenness of demand. Where there is a continuous use 

 for funds the rate will tend to be lower than where there is a 

 large demand for certain seasons of the year and a small demand 

 other seasons. If funds must lie idle half of the year awaiting 

 a seasonal demand, a high rate must be charged for the time 

 the money is lent in order to make up a normal average rate, 

 or else funds must be imported, at some expense, for the de- 

 mand period and sent elsewhere for investment the remainder 

 of the year. 



Immobility of funds. One reason for different rates at dif- 

 ferent places is because some money lenders do not know so 

 much about the character of the investments at a distance and 

 prefer to have their funds close at home. Others are willing to 

 lend money at a distance but find that it costs more to ascer- 

 tain the character of the loan, hence they must have a higher 

 rate, and, again, when the financial institutions intervene to 



