condition of barter. It has been the function of modern commerce and finance, as capital grew in volume, to devise new means of transferring it from place to place and from industry to industry. Hence has arisen the complicated but symmetrical structure of deposit banking, note issue, the joint stock company, the negotiable security, the produce and stock exchanges, the bankers' clearing house, the stock exchange clearing house, the cable transfer for credit, and the arbitrage of stock and exchange transactions, by which the change of a fraction of one per cent in the rate indicating the demand for credit in one market would put at its command the surplus resources of other markets.

This great fabric has been rendered necessary by the growth of the fund of capital seeking investment. This growth in the volume of capital has been the phenomenon of our generation. It has been a growth of astonishing rapidity, because the increase in the investment fund has been much more rapid than the increase

in the total capital of the community. This has resulted from a simple process of mathematical increment. If an agricultural producer in 1850 had an annual producing power which might be expressed by $350, of which $300 was necessary to supply his actual physical necessities, he would have a surplus of $50, to be made a part of the investment fund of the community. If ten years later, in 1860, he had increased his producing power by one seventh, his total annual product would be $400; but the effect would be felt upon the investment fund of the community, not merely by the increase of one seventh, or about 15 per cent, in his total product, but by an increase of 100 per cent in the net product. Assuming that his actual needs were still supplied by $300, he would have $100 for investment where he formerly had $50. If by 1880 his annual producing power had increased still further by one fourth part of its efficiency in 1860 to a total of $500, the surplus funds seeking investment in the market would have risen by another 100

per cent within twenty years, or by 400 per cent within thirty years.

These conclusions, based upon hypothesis, are sustained by the evidence. The increase in the capital employed in manufactures over and above the normal increase in proportion to population is one of the gauges of the increased fund of saving in the community. This increase was from $2,118,208,769 in 1870 to $9,831,486,500 in 1900. This increase of more than $7,700,000,000 in manufacturing capital since 1870 is paralleled by the increased application of capital in another direction, the construction and equipment of railways. The total liabilities of American railways, chiefly upon their capital stock and funded debt, increased from $3,784,543,034 in 1873 to $14,270,301,564 in 1902. If the increase had been only in proportion to population, the total investment at the present time would be only about $7,000,000,000, leaving a residue of an additional $7,000,000,000 as a result of the increased producing power of the people of the United States under modern

conditions. The two items of manufacturing capital and railway investment thus account for an investment fund of $18,000,000,000, which has been accumulating during the past generation, and these are only illustrations of the great fund of saved capital seeking investment which has been accumulating in recent years in every field of productive industry.

Capital available for investment is subject to the law of supply and demand. In this respect, it does not differ from commodities of a more specific character. Other things being equal, two important elements operate upon the price paid for an investment,-its safety and the net return paid in interest or dividends. A high degree of safety will contribute toward raising the price of an investment, but this rise in price will render it less attractive upon the other side by reducing the return upon it. For the owner of an investment security, and especially for him who has it to sell, a scarcity of safe securities and a rise in their price are acceptable and desirable. For the owner of capital

seeking investment, however, an excess of such capital in the market and a high price for securities are an injury, because they reduce the earning power of his capital, in whatever particular securities he may invest it. To meet his needs, new demands for capital must be found from time to time, equal to the amount of capital created.

To find such openings for investment is the business of the financier and promoter. He found them early in the nineteenth century without difficulty, because new demands for capital were springing up faster than they could be met. When society is in a stationary state,—that is, when there are no important new inventions or changes in social conditions,saved capital accumulates faster than opportunities for secure and profitable investments present themselves. The tendency of such a condition is to correct itself by creating new wants, and hence invoking a demand for the capital to provide the mechanism to supply them; but this tendency has not prevented on sev