§13. Summary

We have found evidence general and specific, from correlating P' with both bond yields and short term interest rates, that price changes do, generally and perceptibly, affect the interest rate in the direction indicated by a priori theory. But since forethought is imperfect, the effects are smaller than the theory requires and lag behind price movements, in some periods, very greatly. When the effects of price changes upon interest rates are distributed over several years, we have found remarkably high co-efficients of correlation, thus indicating that interest rates follow price changes closely in degree, though rather distantly in time.

The final result, partly due to foresight and partly to the lack of it, is that price changes do after several years and with the intermediation of changes in profits and business activity affect interest very profoundly. In fact, while the main object of this book is to show how the rate of interest would behave if the purchasing power of money were stable, there has never been any long period of time during which this condition has been even approximately fulfilled. When it is not fulfilled, the money rate of interest, and still more the real rate of interest, is more affected by the instability of money than by those more fundamental and more normal causes connected with income impatience, and opportunity, to which this book is chiefly devoted.

Edition: current; Page: [452]