Like the daily cooperation of living men, this cooperation of past, present and future is essential to the well-being of mankind, and yet it is undesigned and unorganized.  As private individuals, men do, indeed, deliberately provide for their own future, and for that of their kith and kin:  as the directors of businesses, they try to forecast the trend of demand.  But such conscious calculations and deliberate acts would avail little if they stood alone.  They are hardly more than the necessary spokes in the great wheel which regulates the relations of past, present and future.  The hub of the wheel is an elaborate system of borrowing and lending, essentially similar to the buying and selling of commodities.  The private individual in order to provide for his family or for his old age “saves” and “invests.”  But what exactly does this mean?  It means that he transfers so much purchasing power, which he might have spent on his personal pleasures, to some one else in return for the expectation of receiving, year by year in the future, he and his heirs after him, a certain smaller quantity of purchasing power.  The other party to the transaction will be, we may suppose, a business man who enters into it because he sees the opportunity of a promising industrial development, to undertake which he requires more purchasing power than he himself possesses.  And, because this transaction is entered into, a smaller number of us will shortly be engaged in making motorcars, or gramaphones, and a larger number of us in making factories and machinery, which will later enhance the world’s productive power.

Many transactions of the kind take place daily in modern communities, and their multiplicity gives rise to a mass of phenomena with which we are all tolerably familiar.  We recognize a short-loan market, a stock exchange, a number of “markets” where lenders and borrowers are brought together by the aid of various intermediaries, such as banks, bill brokers, and stock jobbers, who correspond to dealers in commodities.  Between these different specialized markets, we are aware of an interconnection so close and strong that we speak more generally of a Capital Market, of which the stock exchange, the short-loan market and so forth, are the component parts.  Now, “market” is a word which was originally used to denote a place where tangible commodities were bought and sold; and the more closely we examine the phenomena of the Capital Market, the more closely do we perceive the profound resemblance between the mechanism of borrowing and lending, and that of buying and selling.  Corresponding to the price of a commodity is the rate of interest (in the short-loan market we actually call the rate of Discount “the price of money,” and speak of money being cheap or dear); and between the rate of interest, the demand for and the supply of capital there exist relations precisely similar to those between price, demand, and supply in commodity markets.  Above all there is the same strong prevailing trend towards an adjustment of demand and supply.