To reach a reasonable solution we must first examine the effect of an unduly increasing supply of gold on commodity prices. Over-production in any quarter inevitably leads to lower prices. Gold being a fixed standard cannot decline in figures, but it does so in fact. That is to say, the flexible prices of things which gold will buy rise to fill the gap. Thus, since 1896, prices of commodities have risen 50%. The man who loaned money ten years ago finds its purchasing power impaired 33⅓%, when it is returned to him today, for the reason that commodity prices having advanced 50% in the interim, his dollar will now buy only 66⅔% of what it would buy in 1897. This impairment of principal will be covered, in part at least, by interest rates. This effect, if not recognized and arbitrary would adjust itself automatically, regardless of whether or not investors recognize the influence of changing values of gold, for money, finding higher returns in other quarters, would speedily desert the long-term, fixed-interest investment field, and prices of such securities would decline through lack of demand. On the subject of interest rates Mr. Holt says: “But there is another reason why interest rates should be high when prices are rising. When money is shrinking in value interest rates should be high to make up, or partly make up, the losses on the principals of loans. To illustrate: Suppose that prices are rising 10% a year. This means that the purchasing power of money is declining about 10% a year. Suppose, then, that $100 were loaned for one year at 5%. At the end of the year the lender would have $105; but with this $105 he could buy only about as much as he could have bought with $95, at the beginning of the year. In reality, he has received no interest at all but has, instead, paid $5 to the man for holding his $100. The man with money to loan cannot afford to do business in this way. He is usually as wise as are his neighbors, and fully as able to protect his own interests and to get all his money is worth, either by buying real property, investing in bonds and stock or by loaning on notes or on call.”