forces are unusually productive, the interest rates
are high as compared with another community with few competitors in
industrial enterprise and less productive forces. Thus in countries having
new land producing large crops with moderate exertion and an increasing
population ready to put in such crops, the return for the use of capital
in provisions, stock and machinery is great, and the lender gets high
rates of interest. If, added to this apparent productiveness, there are
risks of failure from droughts, storms and injurious insects, the bargain
is more favorable to the lender in expressed terms, though it may be less
favorable in actual results. Thus risk enters practically into
calculations of interest, whatever the circumstances.

Interest varies in the same region with a variation of energy and
productive enterprise or of the speculative spirit undertaking great
improvements, and on the other hand with any change of circumstances
affecting universal credit. Distrust on the part of anybody reduces the
readiness with which borrowers find lenders. In times of widespread lack
of confidence, when all credit becomes debt, the borrower is likely to
offer unusual rates of interest. And the few who are willing to lend at
all expect enormous profits in such interest.

Similar variations in rates of interest are found between different
classes of borrowers, due to the variation of risk. Thus promises to pay
on demand, with personal security of two good paymasters, will usually be
accepted at very low rates of interest, since the owner of wealth so
loaned feels sure of having the wealth when he wants it. Government loans
in times of peace and prosperity being essentially without risk, approach
very near the same low rate of interest, since the owner of these
securities believes himself at any time able to command the use of his
wealth for any purpose by a transfer of these securities. If for any
reason, official or legislative, public confidence is disturbed, rates of
interest on such securities rise proportionally through the sale at a
discount. Even a law prohibiting such sale would have exactly the contrary
effect to that intended, because of creating additional distrust. Loans
upon time, if secured by productive landed estate not subject to unusual
risks, can usually be made at moderate rates, and form a fair basis for
judging the normal interest in any region. Loans secured by chattel
mortgage bring higher rates, becau