THE INFLUENCES OF THE INTEREST RATE ON THE BUSINESS CYCLE.

So much has been written on the theory of interest rates and their influence; yet so indecisive have been the available facts. As usual, theories are more abundant as the facts are few. It has been assumed, for example, that the 60 or 90 day rate on commercial paper is the typical interest rate and that its gyrations are characteristic of interest rates generally. As a matter of fact, this rate applies probably to scarcely 1 per cent of the total amount of money loaned in one form or another in the United States. The questions here to be considered are: what are the typical and dominant interest rates of the country; how much do they vary; and how much influence has this variation on the changes in the trade cycle? The discount rate of the Federal Reserve banks, applying to a sum which in recent years has varied as widely as from nearly 3 billions to less than 200 millions; range of rate within this period, 3 to 7 per cent. There is the large volume of current and casual credit extended by manufacturers, jobbers, retailers and dealers of all sorts to their customers.