fruitless. The rate of interest is determined by the rent of land which the same amount of money will buy, where the security is undoubted. Below this the rate of interest can not fall. When the security of investments is doubtful, it is natural for the rate to be high. This is the case in Ireland. A low rate of interest, which many of Petty's contemporaries looked upon as a cause of wealth, he regarded as an effect of general industrial prosperity. Holland, where the rate was low, had an abundance of money, and this it had secured by an enlightened commercial policy (226).
Exchange he defines as local interest. Its rate is governed by the height of the premium on the risk, and by cost of transport from one place to another (35). Local differences of profit will also modify it. Exchange can never naturally be more than the cost of land and water carriage between the two respective places, and the insurance. Ireland is an apparent exception for the rate of exchange between that country and England is much higher than this principle would allow. This abnormally high rate is the result of the restrictions placed upon Irish trade with England. Goods going out of Ireland to pay bills in England must be taken to the Barbadoes and there sold for sugar. This sugar must be brought to England and sold there. It is easy to see why the rate of exchange has risen to fifteen per cent. (349).
Petty's residence in Holland had made him familiar with the banking system of that country. "The trade of banks," he explains, "is the buying and selling of interest and exchange." (Quant.) Their honesty is enforced by the peril of losing their busi-
