Financial Legislation and its Limitations. 3 1 



men. and to debtors and creditors, are ver}^ largely under the ^^^ "standard 



. . J o J ^f value " 



dommation of credit. regulates 



Nevertheless, in long periods, they do revolve about the metallic '"'"^^^' 

 value; although that itself is difficult of determination on account 

 of credit reactions and hence discussion as to proposed material- 

 istic standards of debt-absolution may be held to be pertinent 

 only in so far as any material standard may afifect them. The 

 reader is warned that in treating prices as though they were 

 wholly fixed by metallic determinants, one is committing the 

 error of artificial assumption, and is introducing a false simplicity 

 into the discussion. Partly, perhaps, because of tradition and 

 habit, it has seemed impracticable, however, to separate the 

 method to be pursued in this part of the study of credit from the 

 preliminary hypothesis of independent determination of prices 

 by a precious metal, and consequently, the new topic takes as its 

 point of departure this concession of an extent of influence in- 

 herent in it which really does not exist. Credit will not for the 

 present be studied in its organic relation to the level of prices, 

 but, on the contrary, the popular view will be provisionally 

 adopted, which is rivetted solely upon changes of level as an 

 argument for adminstrative interference with the status of 

 creditor and debtor. 



It is only a rough approximation to say that, in very long 

 periods, the standard of value is established by the legal coin. ^^^^ ^^^ ^j^^ 

 On the other hand, on the average, the age of farm mortgages farther and 



• r ,> • 1 1 J 1 • J • , fa'se hypothe- 



now m force is only about two and one third years in the sis that moder- 

 United States.^® City mortgages are often made for one year, of^ pHceT are^ 

 not with the expectation that they will be paid within that space i"i""°"s. 

 of time, but for the purpose of allowing the interest rate to be 

 readjusted, by mutual agreement between debtors and creditors, 

 according to the rates prevailing at the end of consecutive years. 

 If the interest rate is mutually adjusted to the fluctuation of the 

 level of prices, and both are the result of the state of credit, 

 variations in the market price of the metallic standard of value, 

 however that may find expression, can exert but an indirect effect 



'Fisher, Appreciation and Interest, p. 



145 



