disposed of the subject by the somewhat jocular remark that if more money were put into the market it would become cheap, just as if more horses and hogs were put into the market horses and hogs would become cheap. I suggest to the Senator from Indiana that the horse and hog argument is not quite sufficient in this case. He has only shown in this instance, as in many others, that he does not appreciate the difference between capital and currency, especially between capital and an irredeemable paper currency. I shall try to make myself clear.
Why will the inflation of an irredeemable paper currency not lower but raise the rates of interest?
In the first place, in depreciating the currency it will make a larger amount of currency necessary to perform the same transactions in business, and the aggregate amount of interest which you would have to pay for the sum you want for the same transactions would necessarily be larger. That, I think, is obvious.
In the second place, when the currency is inflated it incites speculation and gambling. This fact is so notorious that nobody questions it. Speculation and gambling dealing in large ventures and working for very large profits induce, and in most cases force, those engaged in them to pay high rates of interest in order to obtain the money with which to float their speculative enterprises from which they expect such large profits. As soon as speculation rules the money market, the rates of interest will therefore necessarily rise, and legitimate business, from which money is diverted by speculation, must conform itself to those high rates in order to obtain the money which it needs; and hence a general rise of rates.
But still another element comes in here to produce the same effect, and that is the element of risk. When an irredeemable currency is inflated, it depreciates in value. The capitalist who lends out money must take that con-
