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consider the question. If money, in from him. The supply of money is the shape of loan, differ in nothing very irregular, and competition is from commodities of trade, there can greatly in favour of the lender. The not possibly be any difference between latter can vest his money in public the lending and borrowing of money, securities, &c. until he finds a borand the selling and buying of commo- rower to his mind; and if he keep it dities : the lenders and borrowers of so vested for years, he suffers compamoney must of necessity stand in pre- ratively nothing; he is free from the cisely the same relative circumstances compulsion which rests on the boras the sellers and buyers of commodi- rower. If the borrower have to pay ties. What is the truth?
a higher rate of interest, he can neiThe sellers and buyers of commodither raise the profits of his business, ties form one body; the seller is com- nor do without borrowing, At the monly a buyer likewise, and he can time when his profits are the worst, gain in the one capacity, if he lose in his need for borrowing is the greatest, the other. The lenders and borrow- and he must pay the highest rate of ers of money form distinct classes ; the interest. The borrowing of money, borrower cannot lend, therefore he in various cases, occupies much time, cannot gain from lending what he may and is attended with much expense lose from borrowing.
and trouble. The rate of interest The seller and buyer of commodi- varies greatly, and it is the highest to ties are on an equality; they both act the poor man, and the lowest to the from choice; the one can make his rich one. It is not regulated by the needs public, and go from man to man profits of business, and its variations in search of an advantageous bargain, clash with the weal of the community. in as much security as the other. In respect of both time and person, it There is no more discredit in wanting is the highest when public good preto buy, than there is in wanting to scribes that it should be the lowest; sell ; and the seller has no more means and the contrary. When the case is of taking advantage of the buyer, than different, it forms the exception to the the buyer has of taking advantage of rule. the seller. There is commonly an If the price of the commodity beabundance of com odities in the mar- come very high, this creates its own ket, and competition favours not the remedy, by enlarging production and seller more than the buyer. The seller foreign supplies. In most cases it can make nothing of his commodities cannot sensibly injure the body of the until he sells them; he can only hold community; and in others it cannot them for a short period, and it is as produce any large and lasting portion necessary for him to sell, as it is for of public evil. But if the price of the the buyer to buy. If the buyer have loan become very high, this creates to pay a higher price, he can still ob- what will perpetuate and increase the tain the same rate of profit; and he advance ; it paralyses and destroys is not compelled to buy, if he cannot agriculture, manufactures, commerce, do it without loss. The bargains are and domestic trade ; it diminishes the work of a moment, and they are public revenue and raises taxes; it has attended with no cost and trouble. the most pestilential effects on the Prices are the same to the poor man whole community. as to the rich one. This forms the Much more we could say on this general rule ; when the case is dif- point, but more is not necessary. The ferent, it is the exception.
single truth, which no man living can The reverse forms the general rule impagn, that a very high rate of into the lender and borrower of money. terest for borrowed money must have They are not on an equality; but the the most destructive effects on all the one has very great advantages over the best interests of the empire, is of it. other. The lender gains credit and self sufficient to demonstrate that morespectability from making it public ney, as a loan, differs essentially and that he has money to lend; the bor- wholly from any commodity of trade. rower suffers in both from making it The fact, therefore, of the usurers is public that he wants to borrow. The worthless fable, and the inference we former can select his customer, the must necessarily cast to the winds. latter is often bound to one individual, The Usury Laws take their stand whatever terms may be demanded upon the difference between money as trading capital and money as a loan. merchants, manufacturers, farmersThey interfere not with money, in so all who are in business, constantly far as it resembles commodities; the labour to obtain the highest price man who employs it in buying and possible; and if they had their cusselling may draw from it twenty, tomers at their mercy, they would fifty, or eighty per cent, and they will be as ready to extort from them a give him no molestation. But when profit of 40, 60, or 100 per cent, as it ceases to resemble commodities, they any usurer whatever. They are contake it under their regulation. Whytent with moderate profits, only bedo they do this ? To make it as far cause they are compelled to be so. It as possible a commodity like other may be safely taken for granted, that commodities. The difference is crea- if no such compulsion rested on the ted, not by them, but by the nature of money-lender, he would grind the things; and their object is to remove borrower to powder, by extorting from it. It is acknowledged by the most him exorbitant profit, just as men in competent judges, that they have ale other lines of business would do in ways taken the natural rate of interest similar circumstances. In fact, the for their guide-that they have never' usurers maintain that they have a made the legal rate lower than that at right to obtain the highest rate of ins which people of good credit could terest in their power. borrow. That rate of interest which Are then borrowers so changed in people of good credit could borrow at, circumstances, that they can never be if they were not in existence, they at the mercy of lenders? The quesmake the rate for the whole commu- tion, of course, refers to more than nity; in order that the loan may bear the present moment; legislation must the same price to all, as the commodic have soinething to stand upon beyond ty bears the same price to all. They the state of things in a particular year, endeavour to preserve money as a loan or term of years; it must be based from scarcity, pernicious monopoly, upon what will be, as well as what is ; and an injuriously high price ; and to its regulations must be of a nature to establish that equality between bore suit all times and circumstances. The rowers and lenders of money which borrowers are practically divided into exists between buyers and sellers of three great classes, which differ widecommodities.
ly from each other in the mode of bore As a subsidiary reason, the usurers rowing ; in giving a reply, we will look urge, that, from the altered circum- at these separately. One consists of stances of the country, nothing of what those traders and others who constant the Usury Laws were intended to pre- ly require to have bills discounted, and vent could take place, should these who frequently need loans for a short laws be abolished. This is equivalent period. Another consists of land. to asserting, that there would be no owners, &c. who borrow for a long extortion, and that there would be no term upon mortgage. And the third injurious variations in the rate of in- consists of farmers, tradesmen, &c. terest, in respect of either time or who borrow upon bond or note for a person.
period of considerable and uncertain The question now arises-Are lend. duration. ers so changed in disposition, that, The first class borrows almost expossessing the means, they will scru- clusively of the Banks, except in pulously abstain from extortion on London, where it borrows to a consiprinciple; or are borrowers so chan- derable extent in other quarters. At ged in circumstances, that they can present, money is as plentiful as it can effectually protect themselves from ever be expected to be, and a few extortion? With regard to lend- members of the class can borrow at 2 ers, it will, we imagine, be generally or 3 per cent in London, but not else conceded, that they are wholly un- where. They cannot do this from the changed in disposition ; every man Banks and the money-lenders genewill admit that they are as anxious rally; they can only do it from a few as ever to make the most of their mos individuals. The money lent at this ney. We say not that they are a whit low rate belongs to certain capitalists, more mercenary and rapacious than who wish to keep it loose for speculaother people ; but we say that they tion, and who lend it in heavy sums are not less so. The truth is, that for the moment, to those only whose VOL. XXIV.
solidity is above question. It is not and press upon the sellers, while the constantly employed in lending, and latter hold off from selling, the price the body of borrowers cannot have rises; when the reverse is the case, access to it. This low rate may there the price falls. In respect of money, fore be thrown out of the question, as the borrowers would continually press the trifling accidental exception to the upon the lenders, and of course the rule. In London, and some parts of price of money would rise. These the country, the Banks discount at 4 lenders, like the sellers of goods, would per cent, and in many parts of the always be anxious to obtain the highcountry they discount at 5 per cent. est price; and in the first moment In the metropolis, and the other places they would raise their price to necess .where 4 per cent has been adopted, sitous borrowers. 5 per cent is still charged on bills Although the Banks at present prowhich are not of undoubted respecta- fess to discount and lend at a certain bility, unless they are discounted un- rate, they still, in many cases, vary the der the banking account; and 5 per rate according to the credit of the bor. .cent is still charged on direct loans, rower ; if the Usury Laws should be if the security
be not of a very high abolished, they might, perhaps, to description. Even in those places, their regular connexions and the opu. the most numerous part of this class lent, charge one rate, but to needy of borrowers has to pay 5 per cent; borrowers they would have no fixed and in many parts of the country the rate whatever. If they do not like a whole class has to pay the same. bill or security, they now refuse to
There is never much competition lend: but the case would be widely amidst money-lenders in London. The different, if an offer could be made bill-brokers and capitalists keep up a them on either of ten, fifteen, twenty, little with the Banks in respect of dis- or thirty per cent. If the laws be abocounting; but the banks act to a great lished, they will be constantly solicite degree in concert. In the country, ed and tempted with high terms by the Banks have the market to theme necessitous borrowers; and they will selves, and they do not compete with cultivate a trade with such borrowers. each other. Money-lending is not of They have now a great interest in a nature to admit of competition and keeping bad bills out of being; they underselling: The competition, soli- will then have a great interest in muls citation, and tempting with terms, tiplying such bills. They will accommust be confined to the borrowers of modate many borrowers, who are now money. While the Bank suffers come unable to obtain discounts and loans, paratively nothing if it refuse to lend, on being offered an exorbitant rate of the merchant, manufacturer, or trades- interest; and to the vast body of those man, must almost daily have his bills who can now barely borrow at the discounted, and he must frequently legal rate, they will raise the rate to have his temporary loan, to save him eight, ten, or fifteen per cent. If the from heavy loss, or perhaps ruin. He small merchant, manufacturer, or cannot hawk about his bills, and go tradesman, wbo keeps an account with from Bank to Bank to borrow at the them, and whom they know to be in cheapest rate; the whole he would their power, take to them a bill, they draw from this would be, the destruce will tell him it is of a kind which they tion of his credit. He borrows from cannot pass to his credit, without necessity, and he must borrow from charging a high rate of discount; if one source. The laws establish equalhe ask for a loan, they will complain ity on this point. The lender may that money is scarce, and demand a refuse to lend, but he cannot make his high rate of interest'; and whatever refusal an instrument of extortion; they may charge, he must pay. An the borrower may solicit, but he can immense portion of the smaller, and not bribe with high terms. The price even middling merchants, manufacis fixed, neither of them can alter it, turers, and tradesmen, are generally at and the lender must take it, or keep the mercy of their bankers; from some his money;
cause or other they have not the means If the laws should be abolished, of closing and removing their accounts; competition would have precisely that and when they take in bills, or ask for effect here, which it has in trade. If loans, they must have money, no matthe buyers of cotton, sugar, or any ter what they may pay for it. Amidst other article, compete with each other, a very large and most meritorious por. tion of this class of borrowers, a high come. They cannot perhaps convenis rate of interest will become general; ently pay these expenses, and they and this will raise the rate to other prefer the former. The legal rate is borrowers.
still paid by a large portion of this This applies to the present state of class of borrowers. the money-market, but how long will This class generally borrows from it remain in this state, putting the necessity; from some cause or other chance of war entirely out of the the borrower must have money, no question ? Every one knows-barring matter what the interest may be. We perhaps the members of the House of have here a different class of lenders. Commons-that the supply of money "The Banks do not lend on mortgage. continually varies, even in times of The money is advanced by individu peace; and that in every two or three als, who are constantly on the watch years a fit of commercial and manuface to make the most of it; many of them turing distress, of several months dura. are people of small income, and what tion, takes place, which creates a great they lend constitutes a large part of scarcity of money. If this country what they possess. The large lenders, remain in peace, it is matter of cer who are content with the lowest intetainty, according to all experience, rest, will frequently only lend in large that once in every two or three years, sums, and on first-rate securities. there will be for a considerable time a Speaking generally, when a man borgreat scarcity of money. As in such rows money on mortgage, he parts a scarcity, the Banks, &c., if the Usury with it immediately; and if he be Laws be repealed, will naturally charge called on for repayment, his only althe highest rate of interest possible, ternative is, borrowing the amount of how will the borrowers be circum- some other person, or the forced sale stanced? Will they be independent of his property. If the Usury Laws of the lenders? Will they be able be abolished, he must in any scarcity to obtain money on fair terms in one of inoney pay any price that the lend place, if they cannot in another; or er may think good to demand. If will they be able to do without it, if money be abundant as it now is, there they cannot obtain it on such terms ? must always be a scarcity of it to bora The whole of this class will then be rowers whose security is slender, completely at the mercy of the lende whether they borrow on personal sea ers; money it must have, no matter curity, or on mortgage ; and they what the terms may be ; and it will must pay for it a scarcity price. On be compelled to pay any rate of inte, all the inferior securities—the second rest they may require.
mortgages, those on leasehold proIn time of war there is a constant perty, &c. &c.—the interest will be scarcity of money, and frequently it is raised to 7 or 8 per cent, if the Usury very great. In such a time the lend- Laws be abolished. In fits of general ers will almost always have it in their scarcity, the interest will be pushed power to charge a scarcity price, and up on these securities ; and in the fits the whole of this class of borrowers of abundance, the borrowers will not will be almost always at their mercy. be able to get it down. Such secu
We will now look at the second rities are very numerous ; and the class of borrowers—those who borrow rise on them will create a rise on the on mortgage. Money can at present best. The rise on trading inoney will be obtained on mortgage at 42, or even operate greatly on mortgage money. 4 per cent; but then the security must in time of war this class of borrowers be of the first character. Those who will be ground to powder by the lendborrow on second and third-rate secu. ers. The latter, then, knowing that rities must still pay the legal rate the borrowers must pay whatever they Those who borrowed before interest may require, will be continually callfell, have, to a very great extent, still ing for an increase of interest, not only to pay the legal rate on first-rate secu- from those who may want to borrow rities. If they apply for a reduction, at the time, but from those who have the answer perhaps is no, I will soon- borrowed previously. er have my, principal. They must We will now turn to the third class therefore either continue to pay 5 per of borrowers. A vast number of farcent, or be at expenses in transferring, mers and tradesmen begin business which will swallow the difference of partly with borrowed money: ono interest for two, four, or six years to fourth, one third, or in many cases,
one half of their capital consists of such of the lenders--that frequently in
laws of and he must give any interest that any kind so little evaded as the Usury may be demanded, or be kept out of Laws have been, in regard to this class business ; an individual may lend to of borrowers. The case has been the a farmer, or tradesman, and a few same with the third class. The farmonths afterwards, when he sees that mers, tradesmen, &c. throughout the the money is fixed in farming stock, country, who borrowed on personal goods, &c. he may demand double, or security of individuals, to begin or treble interest, with a certainty that carry on business with, have never his demand must of necessity be agreed been asked for more than the legal to. In time of war, the rate of inte. rate, up to this moment. In respect rest to this class will be ruinous.. of these two classes, the Usury Laws
The Usury Laws keep money-lend. have constantly had the most coming, as a regular trade, in the hands plete success in imposing a maximum of respectable men ; out of London, on the rate of interest. scarcely any one thinks of making Touching the second class, those such a trade of it save bankers, putting who borrow on mortgage, various inpawnbrokers out of the question. But dividuals during the war borrowed at if they be abolished, unprincipled per. a high rate by way of annuity; and sons in almost every large place will this forms the evasion discovered by convert it into a regular trade of ex- the committee. Could they do this tortion and plunder.
legally? Yes. Then how, in the We have said sufficient to prove that name of common sense, could the the lenders of money are still men who committee call it an evasion of the will extort the highest rate of interest Usury Laws? These laws prohibited in their power from borrowers—that a higher rate than five per cent on putting the Usury Laws out of sight, money borrowed in the ordinary way a very large portion of the borrowers on real security; was, then, a higher of all kinds are constantly at the mercy paid on money so borrowed in spite of