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Updated: June 7, 2025
In most great periods of expanding industry, the three great causes much loanable capital, good credit, and the increased profits derived from better-used labour and better-used capitalhave acted simultaneously; and though either may act by itself, there is a permanent reason why mostly they will act together. They both tend to grow together, if you begin from a period of depression.
Sometimes the chattel mortgage sharks collect one hundred per cent, or more and the banks, which are established for the purpose of making small short-time loans, usually collect twenty to thirty per cent. Why should a church member be driven to these extremities when the loanable money in the church is sufficient for all needs?
But if that low rate of interest should cause, or should aid in causing, a great growth of trade, the rise is sure to be quick, and is apt to be violent. The figures of trade are reckoned by hundreds of millions, where those of loanable capital count only by millions.
If the interest of money be raised, it is proved by experience that money does come to Lombard Street, and theory shows that it ought to come. To fully explain the matter I must go deep into the theory of the exchanges, but the general notion is plain enough. Loanable capital, like every other commodity, comes where there is most to be made of it.
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