Page:Popular Science Monthly Volume 81.djvu/574

568 of the needed ability will not enter the various important positions. In the meanwhile, however, the masses of salaried men, all more or less especially trained experts, can not escape the unwarranted losses. They can not leave their employment for lack of training to enter another. They have to submit to losses that are unearned, when for the most part they have deserved better of the public.

4. Persons and institutions with their capital invested in loans have found themselves gradually worse off as prices have advanced. This proposition is particularly true of long-time loans, made either before or early in the upward swing of prices. Obviously both principal and interest were fixed once for all in the loan contract. Consequently, as prices have gone up, the lender received less and less purchasing power in the form of interest, and at maturity of the loan he had also the principal returned to him in depreciated dollars. Prices having advanced on the average about three per cent, a year, he should properly have received also three per cent, a year additional interest money, and he should get back now, not the number of dollars lent, but 50 per cent, more, to offset the decline in the purchasing power of the dollar.

Specifically, if in 1897 a person lent $1,000 for fifteen years at four per cent, interest, he should have received $41.20 interest for the first year, $42.45 the second, $43.72 the third, and so an increase of about three per cent, a year through the period; likewise now, in getting back the principal, he should receive not $1,000, but $1,500. Obviously he has lost, and the borrower has made the corresponding gain. The point is, loss and gain were unforeseen and were not contemplated in the loan contract.

We have here a large class of losers, including owners of government, municipal, railway and other bonds, mortgage notes, fixed annuities, and similar forms of investments. Among persons, the class includes widows and orphans, people with savings for old age, professional men seeking safe places for their surplus income, and business men retired from active enterprise. Among institutions, there are endowed hospitals, charitable organizations, colleges and universities. In general, the class includes only cautious investors, who, so far as possible, seek to eliminate risk from their incomes. Their caution has been rewarded by losses. A virtue which is not too plentiful among investing classes has received rather discouraging setbacks.

For loans made in recent years, especially for short time periods, there has been some compensation for the loss of purchasing power. Since 1900 interest rates have averaged from one to two per cent, higher than normal. This extra rate has in part, but not altogether, offset the average annual rise in prices. The interest rate is now five