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Rh Following this clue, the two separate meanings of the ambiguous word "Capital" are compared, showing that money, which can never be used in the act of production, cannot be capital when that term is used in its concrete sense; and since capital is capable of producing a profit only when the same is used productively, the fact that interest is paid for money-loans, when that which is loaned cannot be used productively, must be traced to an independent cause. The usual argument that with money actual capital can be purchased is rejected, because money and capital would not be interchangeable if their economic properties were not homogeneous. This compels a search for a property inherent in money that can account for the willingness of borrowers to pay interest on money-loans.

It is then shown that interest on money-loans is paid because money affords special advantages as a medium of exchange, and the value of this property of money is traced to its ultimate utility, or, in other words, to the increment of productivity which the last addendum to the volume of money affords by facilitating the division of labor.

Returning to the question of interest on actual capital,—i.e., the excess of value produced over the cost of production,—the question as to what determines the value of a product leads to the assertion that capital-profit must be due to an advantage which the producer possesses over the marginal producer. This is found to be due to the interest payable by the marginal producer on money-loans.

An ideal separation of the financial from the industrial world reveals a tendency of the industrial class to drift into bankruptcy by force of conditions over which they have no control. Those who are at the verge of bankruptcy being the marginal producers, others who are free of debt will reap a profit corresponding to the interest payable by the marginal producers on debts equal to the value of the capital they employ; hence the rate of capital-profit will tend to become equal to the rate of interest payable on money-loans, and the power of money to command interest, instead of being the result, is in reality the cause of capital-profit.

The inability of the debtor class to meet their obligations increases the risk of business investments, and the accumulation of money in the hands of the financial class depriving the channels of commerce of the needed medium of exchange, a stagnation of business will ensue, which readily accounts for the accumulation of all kinds of products in the hands of the producers and for the consequent dearth of employment. The losses sustained by the lenders of money involve a separation of interest into two branches, risk-premium and interest proper, and considering that the risk-premiums equal the sum total of all relinquished debts, the law of interest is evolved by an analysis of the monetary circulation between the debtors and creditors.

This analysis leads to the inference that an expansion of the volume of money, by extending the issue of credit-money, will prevent business stagnation and involuntary idleness.

The objections usually urged against credit-money are considered and found untenable, the claim that interest naturally accrues to capital is disputed at each successive stand-point, and in the concluding remarks an explanation is given of the present excess of supply over the demand of commodities and service, confirming the conclusion that the correction of this abnormal state is contingent upon the financial measure suggested.

Admirably accurate as the foregoing is as an outline, it conveys only a faint idea of the beautifully calm, logical, and convincing way in which the argument is worked out and