y be a gainer, and the _entrepreneur_ will
be a loser. Getting five per cent in commodity as before, the business
man, by reason of falling prices, will realize only about three per
cent in money. His contract, based on the experience of an earlier
year, makes him pay four per cent, and he loses one. Every
acceleration of the rate of increase in the purchasing power of money
plays into the hands of lenders. Every retarding of that rate plays
into the hands of borrowers. If in 1907 the _entrepreneur_ gets a
three per cent rate on what he borrows, as based on the experience of
1906, and if the fall in prices is reduced during that later year to
one per cent, the borrower will make a clear gain of one per cent; and
this will recoup him for his loss in the earlier period. Moreover,
after a long period of steady prices, the beginnings of a downward
trend do not instantly affect the loan rate of interest. A period must
elapse sufficient to establish the fact of this downward trend, and to
enable the struggles of lenders and borrowers to overcome habit in
fixing a new rate that will correspond to the new earning power of
monetary capital. These facts explain what at times looks like a
failure of the loan market fully to take account of the fall of prices
during a given interval. What that market really does is to base the
interest paid in one interval on the business experience of another.

_Opposite Reasons for Favoring Gold as a Basis of Currency._--What,
then, is our practical conclusion? Gold has surprised the world by its
increase and by the rise in prices by which this change has been
attended. The interest on loans has risen as the conditions required
that it should do; but the rise in interest has lagged somewhat behind
the rise in prices. The enlarged output of the precious metal has been
comparatively sudden, and it has been this fact which has played into
the hands of _entrepreneurs_ and, for a brief interval, entailed some
loss on lenders. When the adjustment of loan interest to the rising
prices shall be fully made, neither of these parties will gain at the
other's expense so long as the rise shall continue at the prevalent
rate; but if the rise should cease as quickly as it began, it would be
_entrepreneurs_ who would lose and lenders who would gain. Loans
running at rates fixed when prices were rising would be paid by an
amount of money which would buy more commodity than the business would
afford. With a reduct