INTEREST ON FARM LOANS 687 



fact and the extent of their borrowing than of their buying; so much 

 does the retainment of the principal depend, in spite of law, upon the 

 good faith of the borrower, that the market for the loan of capital can 

 rarely be called a good market. All bargains in the "money market," 

 as the market for the loan of capital is popularly called, take place 

 necessarily upon information imperfect at the best, often of a private 

 and confidential nature: hence it frequently happens that, in the same 

 market, at the same moment, loans upon equally good security are 

 made at different rates. 



Of course, all that has been said of differing rates of interest in the 

 same market holds good of different markets; but, wholly in addition 

 to the causes which produce those differences, is reason found for 

 different rates in distinct markets. Thus it is notorious that, for long 

 terms of years, the loan of capital could be obtained, upon what was 

 locally regarded as approved security, for 4 per cent in London as 

 freely as for 6 per cent in New York, or 8 per cent in Chicago, or 

 12 per cent in Iowa or Kansas. Whence these differences ? In some 

 degree, doubtless, these successive additions of interest, as capital 

 passed westward, were of the nature of insurance on the principal 

 sum lent. 



But not all, or even the greater part of the differences which have 

 been noted are due to this cause. It is the disinclination of capital 

 to emigrate, which allows such wide differences in the local rates of 

 interest. This disinclination is due to various causes. In part, it is 

 due to the suspicion that strangers may not be fairly dealt with by 

 courts and by officers of the law, in cases of seizures or foreclosures. 

 In part, it is due to the apprehension of the effect of international 

 hostilities, which cause a suspension of interest-payments, if not 

 forfeiture of the principal. In part, it is due to the fact that invest- 

 ments made at a distance must generally be made through an agent, 

 upon whose good faith or sound judgment may depend the fate of 

 the principal invested. While these and other causes may operate, 

 singly or in conjunction, to create local differences, the main cause of 

 such differences is found in the inertia of the owners of capital, making 

 them ready to accept lower rates upon the spot than could perhaps 

 be obtained with no less safety, through inquiry and effort at a dis- 

 tance, and, secondly, in the necessary lack of information as to pre- 

 vailing rates of interest and existing degrees of security for the 

 principal. 



