The problem is further complicated by the fact that the relative importance of these two items--rate of interest and value of principal--is not the same in all cases. Whether a lender is affected more by the one item or the other depends upon what he intends to do with his property at the expiration of existing contracts. A widow left in 1860 with an estate of say $10,000, who expected to keep this sum constantly at interest and to find new borrowers as soon as the old loans were paid, could neglect everything but the net rate of interest received. On the other hand, if this estate had been left to a youth of twenty who intended to invest his property in some business after a few years, the rate of interest would be of relatively less importance to him than the purchasing power of the principal when the time came to set up for himself. Of course, the same difference exists in the case of different borrowers. Those borrowers who expected to renew old loans on maturity would have to consider little beyond the interest demanded by lenders, while borrowers who expected to pay off the loans out of the proceeds of their ventures would be interested primarily in the amount of goods that would sell for sufficient money to make up the principal. Although these two classes of cases are by no means independent of each other, the following discussion will be rendered clearer by observing the broad difference between them. Accordingly, attention will first be directed to the effect of the price fluctuations upon the purchasing power of the principal of loans, and afterward to changes in the rate of interest. PURCHASING POWER OF THE PRINCIPAL OF LOANS Most persons who made loans in the earlier part of the Civil War and were repaid in greenbacks must have suffered heavy losses from the smaller purchasing power of the principal when it was returned to them. But while this general fact is clear, it is difficult to make a quantitative statement of the degree of the loss that will be even tolerably satisfactory. In the case of almost all loans made before the middle of 1864 and repaid prior to 1866, the creditor found that the sum returned to him had a purchasing power much less than the purchasing power that had been transferred to the borrower when the loan was made. This decline varied from 1 to more than 50 per cent. On loans made in the middle of 1864 or later, on the contrary, the creditor gained as a rule. In the case of loans made in January, 1865, and repaid six months later, the increase in purchasing power was over 40 per cent. THE RATE OF INTEREST