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interest, and when the Exchequer Bills shall be funded, the pub lic will possess, and may exercise the right, through parliament, of stipulating the means of reducing this fund gradually, out of the produce of the sinking fund: thus annihilating this new debt as early as circumstances will admit.
The capitalist and the mortgagee may urge that it is unjust to reduce the interest of money, and leave the funded proprietor in the receipt of his full income. It is granted that it would be better if the plan of general equalization could be adopted.
But there is an impediment.-The public has contracted with the funded proprietor, to give him a fixed annuity for his money; and the public, or Parliament as its representative, cannot, without a breach of faith, infringe this contract: nor could this country break its faith, without experiencing, as other countries have done, the mischievous consequences of departing from the line of duty, which in the end is the line of policy.
But the country has the right-a right it has ever exercised-of regulating its internal policy, and the rate of interest as part of that policy.
While the writer of these observations contends for the reduction of the rate of interest, as a measure of justice and expediency, others will urge the propriety of repealing the laws against usury; or if that cannot be accomplished, of advancing the rate of interest of money.
That gold in bullion should, like every article of merchandize, be allowed to find its value in the market, is not only fit, but is the policy and the law of this country.
On the other hand, it is the law, and a necessary part of our policy, that our coin should pass at its denomination, and should be of a fixed price, and that the rate of interest should be limited.
To repeal the laws against usury would destroy the standard which regulates the utmost rate of legal interest which can be taken for money :-Thus without any other injurious consequences, the repeal would leave that in a state of uncertainty which is now governed by a limit, which has fixed a maximum for interest.
But whoever knows the rapacity of those who make wealth the object of their pursuit, will feel that it is necessary to guard extravagant heirs, and distressed merchants, manufacturers, and tradesmen, from the consequences of their own folly, their vices, or necessities. Regular and steady tradesmen and merchants might safely be trusted with the management of their own concerns, and the power of giving for money, whatever rate of interest their just speculations, or rather the regular course of their trade, would afford-but all experience in this country has proved the necessity of a law for keeping the rate of interest within a boundary; and
successive legislative enactments have adopted the policy, and have stated it to be a measure of benefit and expediency, to reduce the rate of interest. Were interest left without limit, how lamentable would be the condition of the lauded proprietor! From the low rate of interest which land affords, he never could come in competition with merchants and manufacturers.
Not only in the rate of interest, but that which is of more importance in the value of the property, would the land proprietor be sacrificed. Let the rate of interest be six per cent., and what would the fee-simple be worth? Advance the rate to 10 per cent. and you would have given the land to the individual and public creditors, who have demands on the property of the land proprietor. Those who argue for high rates of interest have lost sight of this important consideration! unless they can assure the proprietors of the soil, that the price of corn and provisions shall keep equal pace with the rate of interest!!
Different rates also of interest can be afforded by different trades; for instance, the West-India merchant would be too powerful a competitor with merchants of a different description; and those adventures and those speculations which promise the highest profits, would exclude those trades and that commerce, which is satisfied with more moderate, though certain gains, from the ability of borrowing money, except upon terms which the extent of the expected profits would not warrant. Even though this should not be the general result of opening the laws against usury, the inconvenience of the experiment would make that change in the conditions and circumstances of different classes of merchants and tradesmen which would, of itself, afford an argument against the attempt to repeal the laws against usury; thus breaking down the barrier against the exactions of the capitalist. In short, if it be politic that the laws against usury should not be enforced, then let redeemable annuities remain part of our system, and an honorable mode of employing money, and the laws against usury will, in effect, be rendered a dead letter.
It must be obvious that high rates of interest must either abridge the profits of commerce and of trade, and must render it necessary to advance the price on the consumer; whilst, in the present state of things, it seems to be wise, with a view to foreign, as well as domestic trade, to bring down the prices to a corresponding level with the reduction which has taken place in the price of provisions. Another injurious result from high rates of interest would be, that you increase the wealth of the inactive part of the community, at the expence of those who are the industrious bees of the political hive!-for you offer an encouragement to the employment of money in interest, rather than to its employment in trade; or more correctly speaking you make it a benefit to the capitalist, to siț
down at ease, content with the profits of his money, in the shapë of interest, rather than to give his active industry to the state, by becoming a merchant, a manufacturer, or a tradesman, through the temptation of encreasing his wealth. You thus deprive the country of the labors and industry of proprietors of capital; and consequently diminish the number of those who are in the best situation to conduct commerce, manufactures, or trade, upon the most advantageous terms, with the best prospects of success and with the least risque of bankruptcy, &c. You also give encouragement to unbounded speculations, in the persons of needy adventurers: men who will injure trade and commerce, from the necessity of their circumstances; who must continually run the race of sales at depreciated prices, rather than be without ready money to meet the demands of their urgent creditors; pressing for the return of the capital advanced, and the high rate of interest.
This state of things would be of ruinous consequences to merchants and others trading on their own capital, or within the boundary of that credit, to which they were fairly and honestly intitled.
In short, this change of system would bring the mercantile and commercial interest into the same state of ruin, as the agricultural interests are now involved in; and from causes very similar; the race of competition to sell in a market which is over-stocked!! Does not the present stage of our trade to Germany, and the probable state of our trade to America, exemplify these observations?
Are not our manufactures now selling in Germany, at less than prime cost, and even by auction, for any money they will produce? What is the cause of this forced market? It arises from the necessity of adventurers to realize any price for their commodities in order to meet the pressing demands of their creditors!! And what will be the consequence? In the first place, regular and steady tradesmen cannot afford to sell at those rates or if they are forced to sell, the sales will be at ruinous prices; thus men who had wealth will be brought into a state of ruin! Their surplus beyond their debts, will be exhausted by the depreciated value of their property!! How many lamentable instances are there already of this state of a forced sale!
2ndly. The market will be glutted and surcharged. Low prices will justify the purchasers to retail at reduced prices, and fix a low market value. The quantity of stock on hand will render future demands less necessary and more distant, and will give to foreigners who are the purchasers of our manufactures, the power of sup plying themselves at their convenience, and consequently of regulating the price by the necessity of those who in successive markets shall be the competitors for sale!!.
That the rate of interest should be increased rather than diminished cannot be conceded. Would government be benefited by such an advance of interest, or could it afterwards carry on its operations? Certainly not in its loans!! Nor in any of its transactions! And can merchants and manufacturers thrive under the payment of higher interest? Is not a saving of interest equivalent to an increase of profits to the amount of the interest which is saved; and is not a reduction of rent a step, in the opinion of these persons, towards cheap bread and lower prices of labor? To argue that a low rate of interest is not an advantage to trade, would be to contend that it is more beneficial to a tradesman or merchant, to borrow money at six per cent., than at four per cent.! No one will admit this, who trades on a capital consisting, in a great measure, of borrowed money; or at a credit bearing, in terms or in effect, interest. All trade on credit, includes interest.
The owner of capital adequate to his trade may deem it for his benefit, that interest should be high; that it may form part of the measure of his profits. This however is in effect to contend for the necessity of high prices, rather than of reduced prices for his commodities; is to favor the argument for advancing rents, or preserving them at a high rate, rather than of reducing them. any other point of view, it is absurd that capital employed by its owner, in trade or in merchandize, should produce a high rate of interest, distinct from the profits of the trade or commerce. Even looking to the benefit of an investment of profits in land, the tradesman or merchant must calculate erroneously on a general result, if he believes that a system injurious to the country or landed interest, would not make him, when he withdrew from trade. or commerce and became a proprietor of land, participate in all the consequences of that system.
What are the real mischiefs to be apprehended from a reduction of the rate of interest? None seems so prominent or so weighty as the danger that the capitalist would send his money to those countries in which a higher rate of interest could be made! This mischief would be very circumscribed! Few would trust their money in the funds, and still fewer on the landed securities, of any other country. Though the interest of America is higher than that of the West-Indies and Ireland, and the interest of the WestIndies and of Ireland, is higher than the interest of Great Britain; yet experience proves that a very small portion of money is invested. on securities of this remote property.
It may be apprehended too, that money would at all times have a direction to the funds, rather than to mortgages. That apprehension will be vain and futile. There cannot be a buyer without a seller! and the seller of funded property must bring into the money market, the produce of the sale. NQ. XIII.
Monied men may also be jealous that the funded proprietor should obtain an advantage over them. This alarm would be unjust and without solid foundation: any great competition to sell funded property would keep the value of the funded property, at a price which would offer a fair and advantageous source of investment in the funds, to those monied men who prefer that species of security.
And any great advance in the price of the funds, would, in the estimation of many, be evidence that the country had approximated to, or even attained, that state of energy and healthy prosperity, which would be a relief from the present difficulties. To accelerate that period, all the existing debt should be funded as early as circumstances will admit, and thus bring the surplus income of the funded proprietor into general circulation, instead of its employment as at present, in the narrow limit of being ready for expected loans, and the advantages which these loans give to investment in the funds over an investment on mortgages.
But some will urge the argument that "the purpose of the violent reductions of interest is to prepare the way for reducing that of the public debt; a measure which, when it is not justified, by a previous fall in the current rate of interest, is nothing better than defrauding the public creditors."
There is more plausibility than reason in this objection. It may safely be contended, that this argument is applicable only when the public creditor is receiving the legal interest of the country, and his interest is reduced by the new regulation. It cannot be substantial and solid in reason, when his income is left undiminished!! It is in vain for him to urge, nor is it true, that the value of his funded property will be depreciated in price. As funded property, its relative value will be increased, and not diminished!! Should he, driven from this ground, allege that he is affected by the system, because that his annuities may be sooner redeemed, and that when redeemed, or when the annuities are sold, he is affected by the terms on which he must invest his money on mortgage of landed property, or in its purchase; this would be a strange argument! Is the country pledged to abstain from any regulations by which its prosperity may be advanced, or its condition be improved, and the means of redeeming the national debt be obtained? As well might it be argued that a system of wisdom or of political economy which should in two years bring the country into the same state of wealth, as it was at the commencement of the French revolution, would be a breach of faith to the national creditor!! Such arguments are spe cious only. They are without foundation in reason; or in any contract expressed or implied, by which the national honor or na