THE RATE OF INTEREST 7

The man who does this beneficent work, increasing
mankind's output of goods, and providing employ-
ment as long as the factory or railway that he helps
to build is running, is induced to do so, as a rule,
by the purely selfish motive of providing for his old
age or for 'those who come after him by earning the
rate of interest that is paid to him for his capital.
What is this rate of interest going to be, and how
much effect does it have upon the creation of
capital ?

Some people argue that a low rate of interest
makes people save more because it is necessary for
them to save more in order to acquire independence.
Others maintain that a high rate of interest induces
people to save because they can see the direct
advantage of doing so. Both these arguments are
probably true in some cases. But, as a rule, people
who have the instinct of saving will save, within
certain limits, whatever the rate of interest may be.
When the rate of interest is low they will certainly
not reduce their saving because each hundred pounds
that they put away brings them in comparatively
little, and when the rate of interest is high the attrac-
tion of the high rate will also deter them from dimin-
ishing the amount that they put aside. Moreover,
we have to consider, not only the money payment
involved by the rate of interest, but its buying power
in goods. In 1896 trustee securities could only be
bought to return a yield of 2 J per cent, for the buyer ;
now the investor can get 5i^per cent, and more from
the British Government. And yet the power that
this 51 gives him over the goods and services that he