Compound interest

“ We pay to each individual a full compensation for all assistance rendered in labor or other services, and charge him a fair price for what he receives from the Phalanx; the balance of earnings, after deducting the amount of what he receives, to be credited to him as stock, to draw interest as capital. To capital, whether it be money or property put in at a fair price, we allow ten per cent. compound interest. This plan will be pursued until our edifice is finished and we have about four hundred persons, ready to form a temporary organization. ”

“ In lesser properties the same action occurs; a father will buy an annuity for himself, and distribute the remaining capital, each son being at liberty either to place his portion at compound interest, so as to replace at the probable date of his father's death the full amount which he would have received otherwise, or else to trust to replacing the amount when he may be at his most remunerative age. ”

“ Money invested on this accumulating system is said to be placed at compound interest.
There is something startling about the growth of money invested in this way. “A penny,” says Dr. Price, “so improved from our Saviour’s birth as to double itself every fourteen years—or, what is nearly the same, put out at five per cent. compound interest at our Saviour’s birth—would by this time have increased to more money than could be contained in 150 millions of globes, each equal to the earth in magnitude, and all solid gold.
“A shilling put out at six per cent. ”

“ This Proposition better pleas’d those wealthy Citizens, than if we had plaid the Hucksters with our Commodities, wherefore two of the most wealthy and greatest account amongst them bought all, paying us ready money without a penny Credit. After that every man had received his share or dividend proportionably, and according to a general Agreement; we divided our selves into parties as Interest or Inclination lead us. ”

“ We may even conceive a people whose habits were such, that in order to induce them to lend, it might be necessary to offer them a rate of interest fully equal to the ordinary rate of profit. In that case, of course, the productive classes would scarcely ever borrow. ”

“ You will see immense sums brought to light which are at present yielding nothing, and which would be gladly exchanged for productive securities bearing annual interest, when once it is felt that the payment of that interest is certain, and that the capital will not be endangered. ”

“ The objections usually urged against credit-money are considered and found untenable, the claim that interest naturally accrues to capital is disputed at each successive stand-point, and in the concluding remarks an explanation is given of the present excess of supply over the demand of commodities and service, confirming the conclusion that the correction of this abnormal state is contingent upon the financial measure suggested. ”

“ The capital of those who live on the interest of their own fortunes, has generally sought and found some fixed investment, such as the public funds, mortgages, or the bonds of public companies, which investment, except under peculiar temptations or necessities, is not changed.
§ 3.⁠Fluctuations in the rate of interest arise from variations either in the demand for loans, or in the supply. The supply is liable to variation, though less so than the demand. ”

“ Therefore, for the sake of public enterprise in its manifold forms, for the sake of that prosperity which depends on human industry, for the sake of manufactures, for the sake of commerce, and especially for the sake of railroads, by which all these are quickened, we must do what we can to reduce the general rate of interest, which is now such a curb on enterprise; and here we must begin with our own bonds. ”

“ If the yielding of a plank by the borrower to the lender is a natural, equitable, lawful remuneration, the just price of a real service, we may conclude that, as a general rule, it is in the nature of capital to produce interest. ”

“ THAT THE ABATEMENT OF INTEREST IS THE CAUSE OF THE PROSPERITY AND RICHES OF ANY NATION, and that the bringing down of Interest in this Kingdome, from six to four, or three per cent will necessarily, in less than twenty Years time, double the Capital Sock of the Nation. ”

“ Interest is determined by the amount of capital seeking investment in loans, relative to the demand, and in a time of relative contraction of the volume of money, and consequent falling prices, will, as a rule, be low, since there is less inducement for men to borrow capital to engage in business, and more men wishing to lend. ”

“ Now it is conceivable that there might exist, in the hands of persons disinclined or disqualified for engaging personally in business, a mass of capital equal to, and even exceeding, this demand. In that case there would be an habitual excess of competition on the part of lenders, and the rate of interest would bear a low proportion to the rate of profit. ”

“ Eliminating from interest the element of insurance, and regarding only interest proper, or the return for the use of capital, is it not a general truth that interest is high where and when wages are high, and low where and when wages are low? ”

“ First, the capitalist must calculate on at least as large a return on the capital he was to put into the venture as he could obtain by lending it on good security--that is to say, the ruling rate of interest. ”

“ Of the gains, however, which the possession of a capital enables a person to make, a part only is properly an equivalent for the use of the capital itself; namely, as much as a solvent person would be willing to pay for the loan of it. This, which as everybody knows is called interest, is all that a person is enabled to get by merely abstaining from the immediate consumption of his capital, and allowing it to be used for productive purposes by others. ”

“ Let us next examine the principles which prevent the monied men from committing extortions, and which oblige them to lend their money for that rate of interest which is in proportion to the profits upon trade and industry. ”

“ The money in the hands of lenders, in common with all other money, will be enhanced in value, that is, there will be a greater amount of real capital seeking borrowers; while the real capital wanted by borrowers will be only the same as before, and the money amount less: the rate of interest, therefore, will tend to fall. ”

“ I've practically no capital to enlarge the business, and I don't care to mortgage what I have and pay a high rate of interest when, just at the critical moment, we might have a commercial crisis and I would then lose everything. ”

“ The common proportion between capital and profit, therefore, would be the same, and consequently the common interest of money; what can commonly be given for the use of money being necessarily regulated by what can commonly be made by the use of it. ”

“ For instance, the person who had one horse too many, would be obliged to look for another who was in need of one etc. And how difficult a task it would be to determine the amount of interest, if it had to be paid in produce or kind, and even to make a return in produce or kind of capital which had been presumably used. ”

“ The preceding account will, I fancy, help to shew what is practicable, taking things as they are, in borrowing money for public uses. It proves, that the nation loses greatly by the low price of all capitals bearing a higher interest than 3 per cent. ”

“ The undying body in which the particular things are tissues absolutely needs to come into view. The very mention of a problem of interest—of the percentage of itself that a fund of a given amount can annually earn—puts before us at once the permanent entity, capital, and the problems relating to it. ”

“ Another man unable to see below the surface of things and distinguish association from causation! The friends of cheap money do not claim that low interest insures high wages. What they claim is that free competition in currency-issuing and the consequent activity of capital insure both low interest and high wages. ”

“ Again: he, who sells upon credit, asks a price, for what he sells, equivalent to the principal and interest of his money, for the time he is to be kept out of it. Therefore, he who buys upon credit, pays interest for what he buys; and, he who pays ready money, might let that money out to use. So, that he who possesses any thing he has bought, pays interest for the use of it. ”

“ The Effect of Limited Vision on the Valuation of a Perpetual Income.—This failure of vision, or economic myopia, accounts for the fact that the infinite series of payments of interest that a sum of invested capital will earn do not overbalance, in the man's estimate, the principal which he must refrain from spending in order to get them. ”

“ On the other hand, the capital owned by persons who prefer lending it at interest, or whose avocations prevent them from personally superintending its employment, may be short of the habitual demand for loans. It may be in great part absorbed by the investments afforded by the public debt and by mortgages, and the remainder may not be sufficient to supply the wants of commerce. ”

“ A capital lent at interest may, in this manner, be considered as an assignment, from the lender to the borrower, of a certain considerable portion of the annual produce, upon condition that the burrower in return shall, during the continuance of the loan, annually assign to the lender a small portion, called the interest ”

“ The usual argument that with money actual capital can be purchased is rejected, because money and capital would not be interchangeable if their economic properties were not homogeneous. This compels a search for a property inherent in money that can account for the willingness of borrowers to pay interest on money-loans. ”

“ The consequence of this ambiguity is, that as soon as scarcity of money in the latter of these senses begins to be felt,—as soon as there is difficulty of obtaining loans, and the rate of interest is high,—it is concluded that this must arise from causes acting upon the quantity of money in the other and more popular sense; that the circulating medium must have diminished in quantity, or ought to be increased. ”

“ In other words, a low rate of interest, instead of being, as Child imagined, a cause of national wealth, by which he meant the accumulation of capital, might more truly be said to be a consequence of such accumulation ”

“ The chief work of money and credit is done in, and because of, "transition periods." Assume a normal equilibrium accomplished, and you have little trading left to do. It will still be necessary, if you have the division of labor, and private enterprise, for goods to pass through as many different hands as there are different independent enterprisers in the stages of production, and on, through merchants, to the consumer. It will still be necessary to pay wages, rents, dividends and interest. ”

“ The government obtained a large sum at the time, with the necessity of only paying a small sum every year for interest; investors obtained a remunerative use for their money, and if they should need the principal, some one else was always ready to pay its value to them for the sake of receiving the interest. ”

“ By empowering such an authority to buy the companies out in full, with money borrowed at 3 or 31⁄2 per cent., we should come into possession of their works at an annual charge for interest, less, by nearly two-fifths, than our present annual payment to the companies ”

“ Those men in business who call themselves financiers say that money is "worth" 6 per cent, or 5 per cent, or some other per cent, and that if a business has one hundred thousand dollars invested in it, the man who made the investment is entitled to charge an interest payment on the money, because, if instead of putting that money into the business he had put it into a savings bank or into certain securities, he could have a certain fixed return. ”

“ That there must be a limit to the accumulation of capital is obvious. The downward course of the rate of interest, notwithstanding that many new employments have been made possible for capital, indicates how large is the increase of surplus value. ”

“ To prevent their being at the mercy of money lenders, co-operative societies may be started in order to lend money at a lower rate of interest; or to supply them with capital or with tools in order to start their work. ”

“ Interest is determined by the equation between the demands of borrowers and the supply of capital offered by lenders. Or, if we take what is given as the law of profits, it is determined by wages, falling as wages rise and rising as wages fall—or, to use the phrase of Mill, by the cost of labor to the capitalist. ”

“ The rate of interest may, and often does, decrease when the amount of capital has not increased; the amount of capital may increase without decreasing the rate of interest, which may in fact increase at the same time; and so far from the universalization of wealth being the sole means of abolishing interest, the abolition of interest is the sine qua non of the universalization of wealth. ”

“ The lowest ordinary rate of interest must, in the same manner, be something more than sufficient to compensate the occasional losses to which lending, even with tolerable prudence, is exposed. Were it not more, charity or friendship could be the only motives for lending. ”

“ Finally, since in many enterprises only a large amount of capital can be used at all, or at least with most advantage, the aggregation of which from many small sources is ordinarily much more difficult than the division of a large one into small fractional parts; the rate of interest for very small amounts of capital, and especially in the higher stages of civilization, is usually lower than that of large amounts of capital. We need only mention interest paid by savings-bank investments. ”

“ Adjustment of Capital Contributions.—Whenever a partner contributes more than his agreed share, it is customary to allow him interest on the excess amount, and other partners whose investment may be less than the agreed amount are usually charged with interest. ”

“ But in the modern mind, principal, and interest within a limited rate, have so grown together, that we hardly understand how it can ever have been pronounced unworthy of an honorable citizen to lend money on interest. ”