song rather than let it grow stale. The broker is nearly in the same plight. His commodity is not properly the capital itself, so much as a mere temporary use of it, which runs out, to his loss, every moment that it waits. Its general aspect, therefore, is that of a thing forced upon the public with pressure and solicitude; something which teases, tempts, and provokes ́men to make use of it.

Two Rates of Interest.

This gives rise to an important distinction with respect to the rate of interest, which is frequently overlooked. There are two rates, very broadly to be distinguished; namely, the rate of interest for long loans and mortgages, and the rate of discount; to which latter always closely approximates the rate of interest allowed by the broker to his depositors. A loan on mortgage may not be obtainable at less than five per cent., when two per cent. is the rate for discounts. The rate of interest for permanent investments is, according to general understanding, the rate of interest proper. We may, therefore, dismiss from consideration the lower rate of interest, or that allowed, whether by bankers or brokers, to depositors, as included under the phrase "rate of discount," which it so nearly follows'. For the same reason the Bank of England rate of interest for loans may be spoken of as included under the rate of discount, with which it nearly corresponds.

"Rate of interest' will, then, mean the rate of interest for permanent loans; "rate of discount," the rate paid for all sorts of temporary loans, or loans held returnable at short notice.

1 Indeed, the Scotch bankers, who go as near the wind as the brokers themselves, sometimes find that the narrow margin between interest and discount, which is their profit, absolutely vanishes. In such cases they are wisely unwilling for a temporary cause to disturb the minds of their depositors by reductions, which might drive them to rash speculations. But I fear there is a time coming which will task their forbearance and sagacity to the utmost.

Different Variations of the two Rates.

From what has been already said it will be easily understood that these two rates by no means correspond in their variations. The rate of interest does not vary much, and upon the whole there is no index to its fluctuations so true as the very finelymarked barometer of consols. The quotations, however, must be taken not in their daily changes, but in averages for periods of some duration. Thus, when consols have risen from 90 to 100, the rate of interest upon the most highly-valued security, where the capital is sunk, has fallen from 37. 6s. 8d. to 31. per cent. The rate for loans on mortgages or railway-bonds, of course, will follow this at a certain distance, according to the estimation in which the security is held. The limits, therefore, within which the rate of interest fluctuates, are comparatively small; but the sweep of the rate of discount, on the other hand, is of immense magnitude. At one time it is high enough to be denounced by the world as usury. At another it touches the ground-level of one per cent., a point at which Mr. Bosanquet, with a whimsical forgetfulness of the necessity of repaying a loan, once said, that money borrowed would be nearly the same as money possessed. It is clear that the rate of discount, when it rises, must have a tendency to drag up the rate of interest; but if it goes up much, the latter will only follow at a respectful distance. For instance, during the eight-per-cent. period at the close of 1847, no man in his senses would have thought of giving or asking anything like eight per cent. on mortgage, if with an outlook so uncertain men were then found to engage in such a transaction. On the other hand, when the rate of discount falls, it has even a less tendency to draw the rate of interest after it. After a crisis, the rate of interest for a time remains high, while the rate of discount rapidly falls, from the in-pouring of mercantile capital, to be held at command for those who are letting stocks run off and avoiding new engagements. At the present moment, in the language of Lombard Street, money "is a drug." But a land

lord wanting it for drainage would still find it an expensive drug. In a word, "cheap money" for merchants does not mean that money is equally cheap for those who want to employ it in any of the more permanent forms of industrial investment. Still there is a real sympathy between the two. Their great divergences last only for short periods. There cannot, for any length of time, be a great depression of the rate of discount without the rate of interest falling after it, for such continued depression of the rate of discount implies that all the channels of commerce are overcharged with capital, and therefore shows a state of things in which money disposable for permanent investment is not likely to find

room.

General Tendency to a Glut of Money in London.

From the arrangements of the money market which have been explained, it will be seen that their effect is to pour all the spare money capital of the kingdom into the central reservoir. Whether the present low rate of interest allowed by brokers prevents any capital from being sent up, I cannot tell; but it is a very likely result, and, at all events, there must be some point at which the motive to provincial bankers to transmit their funds would cease, in which case we should look for a new set of effects in the country. The general tendency, then, must be to a glut of money in London. The stream of supply may be occasionally interrupted, thrown back, as it were, and thwarted in its course for a time, but only to return to the old channel with increased volume and velocity. An abundance of disposable capital offered for short mercantile loans, including also a portion which, at the same time, is intended by its owners for longer investment, is then the habitual state of the supply of that article in which the frequenters of the market deal. To see how this operates, we must look into the nature of the demand.

Nature of the Demand for Money.

The demand for ordinary goods at the existing price is for some definite quantity. If a lower price is fixed, it is because the dealer wants to draw in more buyers, in order to get some extra quantity taken off his hands. But the buyers in the money market, that is to say, the borrowers, want no stimulus to come forward. There are always enough of them ready to take loans if they can get them. It is upon the lender that the stimulus chiefly acts, causing him to be less nice in his choice of bills for discount at one time than at another. There is a certain quantity of first-class bills, at any one time, which cannot be increased by any possible reduction in the rate. If there be more money to place out than the first-class bills absorb, the broker must take second-class, and then third-class; so that by far the most important effect connected with the reduction of the rate is, that the discounts go lower and lower amongst the inferior bills, until capital is, to a very large extent, placed within reach of persons who could not otherwise obtain it. The difference between four and two per cent. is a trifle compared with the difference between getting the loan and not getting it at all. When the rate of discount is high, many borrowers are shut out altogether, to whom the fall in the rate restores a very free command of capital.

Speculators.

Amongst these is a swarm of speculators, whose precise means no one knows, who hover now about Capel Court and now about Mincing Lane; who, while times are hard, remain dormant and out of sight, like the flies, but at the first outburst of the speculative summer, reappear and fill all the air with their hum and profitless activity; profitless, that is, to the public, not to themselves. For it does happen from time to time that one or other of these spectral visitants contrives to

invest himself with the flesh and blood of actual parish-ratepaying existence, and neat suburban villas may be seen, which have been thus conjured out of the general stock into the hands of their possessors, without capital or industry, or warehouse or character, solely through a dexterous manipulation of the money power placed for a time at their disposal by others. The cause of success is, of course, a lucky hit, a fortunate anticipation of one or more of those great fluctuations in prices which often form the basis of transactions apparently commercial, but in reality not different in principle from the operations of the hazard table.

Moral Habits of Commerce.

Commerce and gambling run into each other by shades so gradual that it is hard to say where one ends and the other begins. Nevertheless, the distinction is as real as between black and white, which may join by a thousand intermediate shades, and the moral habits which they engender are as opposite as light and darkness. Mercantile morals are indeed not the highest, but they are high, and perhaps mark as high a point as has yet been attained by any wide-spread class of men. Untiring industry from youth up; resolute scorn of delights where they interfere with laborious days; faithful, exact performance of every business duty, great or minute; and a sensibility of mercantile honour, which, in the beautiful words of Burke, feels a stain like a wound-all these belong to the best types of the class, especially as it exists in England. But with these is too apt to combine a hardness towards claims which intervene between those of strict right and those of absolute mercy. The merchant is princely in his charities, and towards the men of his own class, when unfortunate, as in cases of bankruptcy without fault, eminently generous and forbearing; but while he is in the hot strife of business, his adversaries are his adversaries, and not his brother men. The rules of the