nancial state of the British Empire at the opening of the new year, are such as to inspire a just and happy confidence in its continued and increasing prosperity. And whatever temporary embarrassment may appear to have taken place with respect to the interests of the landed part of the community, though certainly much general inconvenience, and even great individual distress has arisen from it, yet the consequences are only for a time, and must be regarded but as the natural retrocession of a stream which has been flowing with unnatural and overstrained rapidity, and has met with a strong and sudden check of tide. It is that which has happened almost invariably on the return of peace, after a war of any length and extent. After the conclusion of the American war in 1783 the same general confusion, the same stagnation of the markets, the same failure of payments; and even a still greater number of bankruptcies were the consequence of the sudden stop of the Government contracts, and of the demand for the supplies of war. But what followed!

adiversion of the employment of capital into new channels; and an increase of commerce, of agriculture, and of general wealth, which led us to the height of financial prosperity, and laid the foundation of those immense resources which have enabled us to prosecute, to its successful and triumphant termination, the most important war in which the country has ever been engaged, and have placed on the brows of Britain a wreath of such unfading glory as veils the laurels of Greece and Rome in deep and dark eclipse. A war, in the direction of which you, my Lord, and your Colleagues, have pursued a line of conduct so happily illustrative of that due combination of prudence and resolution inculcated by Machiavel.

"Verum ita rerum administrationem prudentia et humanitate temperat; ne nimid confidentiá incautum, aut diffidentiá non ferendum efficiat.”

FALKLAND.

CONSIDERATIONS

ON THE

RATE OF INTEREST,

AND ON

REDEEMABLE ANNUITIES.

BY

EDWARD BURTENSHAW SUGDEN, Esq.

LONDON:

ADVERTISEMENT.

THE following sheets comprise the writer's observations on the expediency of raising the legal rate of interest, which were contained in a pamphlet; the principal object of which was to enquire into the expediency of repealing the first annuity act. That has since been done. The usury laws now excite so much interest, that the writer is induced to re-publish his observations upon them with some additions; he has subjoined some remarks on the proposed prohibition of grants of redeemable annuities, and the general reduction of the rate of interest.

Lincoln's-Inn,

12th Feb. 1816.

CONSIDERATIONS, &c.

THE notion that it was immoral to make interest of money has happily long been exploded. Paley justly smiles at a provision in a statute of James the 1st. which prohibited beyond a certain rate of interest to be taken (and consequently allowed it under that rate), "that this statute shall not be construed or expounded to allow the practice of usury in point of religion or conscience." Jeremy Bentham, in his able defence of usury, is very facetious on the passage usually quoted from Aristotle, that "all money is in its nature barren." He justly observes, that a consideration which did not happen to present itself to that great philosopher, but which, had it happened to present itself, might not have been altogether unworthy of his notice, is, that though a daric would not beget another daric, any more than it would a ram or an ewe, yet for a daric which a man borrowed he might get a ram and a couple of ewes, and that the ewes, were the ram left with them a certain time, would probably not be barren: that then at the end of the year he would find himself master of his three sheep, together with two if not three lambs: and that if he sold his sheep again to pay his daric, and gave one of his lambs for the use of it in the mean time, he would be two lambs, or, at least, one lamb, richer than if he had made no such bargain.2

The precept in the law of Moses, which had long been consi

dered to stand in the way of taking any interest, was at length discovered to have related to transactions between Jews alone, and not to affect the barterings of Christians! When usury, as it was then termed, was allowed, most states fixed the amount of profit which might be taken on loans. This established a distinction in terms; what the law allowed was termed interest, any rate beyond that was deemed usury. The rate varied in every state and every age according to the degree of commerce in the country and the safety of loans. In most states an arbitrary rate was fixed. Hume says, that if we consider the whole connexion of causes and effects, interest is the barometer of the state, and its lowness is a sign almost infallible of the flourishing condition of a people. It proves the increase of industry, and its prompt circulation through the whole state, little inferior to a demonstration.' This is so universally admitted, that we need not be surprised at the anxiety manifested in most countries to keep down the rate of interest. Adam Smith, however, has said, and, I think, justly, if rightly understood, that no law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made. Notwithstanding the edict of 1766, by which the French King attempted to reduce the rate of interest from five to four per cent., money continued to be lent in France at five per cent., the law being evaded in several different ways. This proposition should never be lost sight of, and it might be extended to the case of the lowest ordinary market rate of interest, rising above the rate fixed after the law had passed. Mr. Bentham has questioned this position. It may be conceded to him, that a law may be so strictly framed as to prevent any possible evasion according to the letter. But yet if the wants of mankind rise above the law, it must, however strictly penned, give way to them. It will either be openly disregarded, or evaded, with the tacit consent of all parties. This experience shews. Montesquieu observes, that "Le loi de Mahomet confonde l'usure avec le prêt à intérêt. L'usure augmente dans les pais Mahométans à proportion de la séverité de la défence: le prêteur s'indemnise du péril de la contravention." He states to what a pitch usury reached in Rome,

Essay of Interest.

3

3 Defence of Usury, Letter 7.

2

2 Book 2. c. 10. vol. 2. p. 45. edit. 1802. L'Esprit des Loix, c. 19.