“Thus,” comments the writer, “these 13 British bonds, supposedly the safest and least speculative of all securities, have declined an average of over 28 points in ten years. Considering incomes and present prices, the unfortunate investors in these bonds have not only received less than 1% on their investments, during the last ten years, but, should they sell their bonds, they would find that the proceeds have lost 30% of the purchasing power of a similar amount ten years ago. Altogether, they have suffered a net loss, over incomes, of more than 20%, or over 2% a year.” There are other economic influences affecting interest rates through gold supply, but the one given appears to the writer the most direct and forcible when applied to readjustment of prices to income. In weighing the influence of increasing gold production and its effect upon interest rates through the advancing prices of commodities, the student is liable to fall into one grave error. He may perhaps jump to the conclusion that gradually advancing prices of commodities mean gradually advancing rates of interest. This is not at all the case. A sustained ratio of advance means sustained high rates of interest--nothing more. In order to make this clear let us go back to the original principle. Increasing prices for commodities mean an impairment of the purchasing power of money. If the purchasing power of money is impaired 2% per annum through increasing prices of commodities, and the normal rate of interest is 4%, we can cover the deficiency by making the interest rate 6% _and leaving it there as long as this ratio of impairment is maintained_. In other words the man who loans $1,000 at 6% loses $20.00 per annum in the impairment of capital and receives normal interest of $40.00 per annum and $20 extra to cover his loss in capital. Strictly speaking the extra 2% is not interest at all, but an amortization payment. It matters not how high prices ultimately go, he receives each year a bonus sufficient to cover his loss in capital, and the interest rate remains 6%. Therefore, if prices of commodities advanced for ten years and then ceased to advance, but were maintained at the highest figures reached, interest rates would fall because there would be no further impairment of capital, and what was formerly amortization, would become usury. On the other hand, if a new ratio of increase should occur in commodity prices and they should advance 4% per annum, interest rates would, if fully adjusted, reach 8%-4% for normal interest, and 4% for impairment of capital. _2--The effect upon Common Stocks of Railroad Corporations._ Here the effect of high interest rates is, or in time may be, offset by returns in the form of dividends, undivided profits, improvement of property, or the fact that income is not limited. But there is another trouble, and a serious one, for which the gold supply is responsible.