ABSTRACT
Lender's uncertainty is the beginning and end of the essential explanation of interest rates. Interest rates are set in the bond market, and the bond market is influenced by what is happening in asset markets of every kind, and in other markets of every kind, and ultimately by everything which can bear on any market. The bond price, and, as an arithmetical and rigid consequence, the interest rate is an inherently restless variable. In the speculative market, willingness to hold bonds will depend on a belief or conjecture that the next movement of the price of bonds in terms of money will be upward; and a willingness to hold money will depend on a belief or conjecture that that next movement will be downward. The willing holders of bonds, and the willing holders of money, must have opposite convictions, or at least must incline to opposite opinions, concerning the immediately future course of bond prices.
