enough to affect appreciably the debtors and creditors in the case
of short-time loans. The results are appreciable in the case of loans
running from one to five years, and may be very great in the case of
loans made for still longer periods, such as the bonded indebtedness
of nations, states, municipalities, and business corporations, and
as mortgages given by farmers on their land or by owners of city real
estate. A multitude of interests are thus affected by a change in the
value of money. When money rises in purchasing power, receivers of
fixed incomes are gainers. When it falls in purchasing power, they
lose. Receivers of fixed incomes from loans include not merely private
investors, but also many educational and charitable institutions which
dispense their incomes for public purposes. Wages and salaries of many
kinds go up and down less rapidly than do other prices, and thus
to some extent wage-earners are in the position of passive
capitalists[10] as regards changes in the monetary standard. In a
capitalistic age, therefore, almost every individual is affected in
some way by a change in the value of money.

Sec. 8. #Fluctuating standard and the interest-rate.# In connection with
the standard of deferred payments there is presented a problem of
the effect that fluctuations of the standard may have upon the
interest-rate.[11] As the general price-level falls or rises, the
monetary standard conversely appreciates or depreciates.[12] If these
changes are slight in amount and imperceptible in their direction
they may not affect considerably the motives of borrowers and lenders.
Therefore, the rate of interest this year in long-time loans would be
just that resulting in the expectation, on all hands, of a stationary
level of general prices. Suppose that rate to be 5 per cent on the
standard investment (such as real-estate loans and good bonds). Then
the lender of $1000 will receive each year a $50 income and at the end
of the investment period $1000 principal, each dollar of which will
purchase the same composite quantum of goods that a dollar would have
purchased at the time the loan was made. Likewise, the borrower would
pay interest and principal in a standard that reflected an unchanging
general level of prices. But, now, if the general level of prices
unexpectedly falls 1 per cent within the year, the creditor of a loan
maturing at the end of the year would receive (principal and interest)
$1050 which will purch