ons were well grounded,
and the market price of his commodities rises, or he discovers that
there is a permanently diminished demand, and he no longer resists the
course of affairs: prices fall, and money and interest regain their real
value. If by the discovery of a new mine, by the abuses of banking, or
by any other cause, the quantity of money be greatly increased, its
ultimate effect is to raise the prices of commodities in proportion to
the increased quantity of money; but there is probably always an
interval, during which some effect is produced on the rate of interest.

The price of funded property is not a steady criterion by which to judge
of the rate of interest. In time of war, the stock market is so loaded
by the continual loans of Government, that the price of stock has not
time to settle at its fair level before a new operation of funding takes
place, or it is affected by anticipation of political events. In time of
peace, on the contrary, the operations of the sinking fund, the
unwillingness, which a particular class of persons feel to divert their
funds to any other employment than that to which they have been
accustomed, which they think secure, and in which their dividends are
paid with the utmost regularity, elevates the price of stock, and
consequently depresses the rate of interest on these securities below
the general market rate. It is observable too, that for different
securities, Government pays very different rates of interest. Whilst
100_l._ capital in 5 per cent. stock is selling for 95_l._, an exchequer
bill of 100_l._, will be sometimes selling for 100_l._ 5_s._, for which
exchequer bill, no more interest will be annually paid than 4_l._ 11_s._
3_d._: one of these securities pays to a purchaser at the above prices,
an interest of more than 5-1/4 per cent., the other but little more than
4-1/4; a certain quantity of these exchequer bills is required as a safe
and marketable investment for bankers; if they were increased much
beyond this demand, they would probably be as much depreciated as the 5
per cent. stock. A stock paying 3 per cent. per annum will always sell
at a proportionally greater price than stock paying 5 per cent., for
the capital debt of neither can be discharged but at par, or 100_l._
money for 100_l._ stock. The market rate of interest may fall to 4 per
cent., and Government would then pay the holder of 5 per cent. stock at
par, unless he consented to take 4 per cent., or som