Note 186-9 — Chapter IV

In bad times, state loans are usually effected at a disproportionally high rate of interest. This also operates momentarily on the general rate of interest, to the injury of persons engaged in business enterprises; who, by the very fact of the withdrawal of so much capital, become involved in an unfavorable competition. In the long run, indeed, the high or low rates of interest paid by national debts, in so far as the creditor cannot demand reimbursement, has no influence on the rate of interest usual in the country. Such debts as cannot be declared due assume the character of stationary capital, the value in exchange of which is determined by their yearly return, capitalized at the rate of interest usual in the country. (Hermann, Staatswirthschaftliche[TN 22] Untersuch., 223.)