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A TREATISE ON MONEY

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speculate is the opinion which, whether well or ill-founded,or whether upon their own view or upon the authority orexample of other persons, they entertain of the proba-bility of an advance of price. It is not the mere facilityof borrowing, or the difference between being able to dis-count at 3 or at 6 per cent, that supplies the motivefor purchasing, or even for selling. Few persons of thedescription here mentioned ever speculate but upon theconfident expectation of an advance of price of at least 10per cent. . . . But the utmost difference between the rateof discount of 3 per cent, and 6 per cent, for three months,would on a quarter of wheat amount only to 4|d. perquarter, a difference which, I will venture to say, neverinduced or deterred a single speculative purchase. But,given the force of the motive, the extent to which it canbe acted upon is doubtless affected as regards persons whocan buy only on credit, or who must borrow in order tobe able to buy, by the greater or less facility of borrow-ing.”

Moreover—Tooke adds (as many others have since)—falling commodity prices are often associated in actualexperience, not with a rising rate of interest, but witha falling rate . 1

Whilst Marshall, unless I have misunderstood him,regarded the influence of Bank-rate on investment asthe means by which an increase of purchasing powergot out into the world, and Mr. Hawtrey has limitedits influence to one particular kind of investment,namely investment by dealers in stocks of liquid goods,Wicksell— though here also there are obscurities toovercome—was closer to the fundamental conceptionof Bank-rate as affecting the relationship betweeninvestment and saving. I say that there are obscuritiesto overcome, because Wicksell’ s theory in the form inwhich it has been taken over from him by ProfessorCassel seems to me to be reduced to practically the

1 The explanation of this on my theory is, of course, that movements ofbank-rate have so often represented a belated and inadequate effort tofollow a movement of the natural-rate.