Interest (finance)

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ 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 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. ”

“ If you have to borrow money to complete or perfect some transaction or business deal, or to carry you through, or tide yourself over some delay, you can always get it at the regular rate of interest, provided you have reputation, and security. ”

“ That a wise lender wishes to secure for his money the safest investment carrying the highest possible rate of interest; the rate of interest being however subordinated, in his mind, to the safety of the investment. ”

“ The credit, which is rendered as secure as possible in all its stages by the accumulating securities of the drawer, acceptor, and endorsers of a bill of exchange, brings capital into activity,—it carries it directly to those channels in which it may be profitably employed,—it conducts it to those channels by a systematic mode of payment for its use, which we call interest, or discount;—and it therefore carries forward accumulation to its highest point of productiveness. ”

“ 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? ”

“ Again, the thing to which the value of debts is referred may be a thing quite different from the goods borrowed, and with the growth of the money economy and the use of the interest contract, money comes more and more to be used as the standard. ”

“ 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. ”

“ As to internal loans, on which, after all, we must chiefly depend, there are two things that operate against them, to any [Pg 236] large amount; the want of a sufficient number of men, with sufficient moneyed capitals to lend the sums required, and the want of confidence in those who are able to lend, to make them willing to part with their money. It may be added, that they can employ it to greater advantage in traffic, than by merely lending it on interest. ”

“ Or, lastly, there is another process by which, in England and other commercial countries, a large portion of the requisite supply of loans is obtained. Instead of its being afforded by persons not in business, the affording it may itself become a business. A portion of the capital employed in trade may be supplied by a class of professional money lenders. These money lenders, however, must have more than a mere interest; they must have the ordinary rate of profit on their capital, risk and all other circumstances being allowed for. ”

“ 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 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 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. ”

“ It is clear, that when the rate of interest is increased, the gains of money-lenders are augmented, and the money gained will buy a greater quantity of property and [Pg 90] labor. The increased gains of the lender must be paid by the borrowers, by the productions of their own or of others' labor. ”

“ 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. ”

“ In a money economy those who have cash use it to pay their bills or settle their accounts.
Those who buy on credit pay interest to money lenders. The money lenders, later the bankers, make their profits by helping others to spend beyond their own means. ”

“ So employed, it yields, like any other capital, wages of labour and profits of stock. The profit is shared between the banker, who receives interest, and a succession of borrowers, mostly for short periods, who after paying the interest, gain a profit in addition, or a convenience equivalent to profit. ”

“ But the capital usually passes from the lender to the receiver through the means either of money, or of an order to receive money, and at any rate it is in money that the capital is computed and estimated. Hence, borrowing capital is universally called borrowing money; the loan market is called the money market: those who have their capital disposable for investmerit on loan are called the monied class: and the equivalent given for the use of capital, or in other words, interest, is not only called the interest of money, but, by a grosser perversion of terms, the value of money. ”

“ 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. ”

“ 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. ”

“ The disposable capital deposited in banks, together with the funds belonging to those who, either from necessity or preference, live upon the interest of their property, constitute the general loan fund of the country ”

“ It is a capital which remains for the encouragement of productive consumption; that is, it is now applied as a fund for setting others to produce,—to enable them to consume while they produce,—and in like manner to accumulate some part of their productions beyond what they consume. The millions of interest which the depositors have received is the price paid for the use of the capital by others who require its employment. ”

“ 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. ”

“ 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. ”

“ The Rate of Interest depends on the Demand and Supply of Loans. The two topics of Currency and Loans, though in themselves distinct, are so intimately blended in the phenomena of what is called the money market, that it is impossible to understand the one without the other, and in many minds the two subjects are mixed up in the most inextricable confusion. ”

“ 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 rate of interest, which the capitalist will demand, will depend upon a variety of circumstances, and especially upon the risk of loss attendant upon the loan-in other words, upon the character of the security offered by the borrower for the payment of the loan. ”

“ We note, further, that the successful men of business pay as high prices for materials and as high rates of interest for the use of capital, if the scale of their transactions and the greater security of payment be taken, as it should be, into account. ”

“ We look with new confidence to bank interest, or the still better interest of a vested loan, than to a return of profit from what is wholly given away.—Wardlaw.
Men take care how to use their money to the best advantage by sea, by buying land or cattle, or by usury, an easy trade ”

“ They shall convert my said residue of property into money, which they shall then invest in safe securities; the capital thus secured shall constitute a fund, the interest accruing from which shall be annually awarded in prizes to those persons who shall have contributed most materially to benefit mankind during the year immediately preceding. ”

“ They need money, capital, and they borrow it, because they can derive a benefit from its use, much beyond the interest which they pay. They borrow at six per cent of the bank, although the value of money with them is at least as high as eight. Nevertheless, although they borrow at this low rate of interest, and although they use all they borrow thus profitably, yet they cannot pay the interest without "inconvenience and distress" ”

“ This property would all be needed by the organized consumers who, with their continually accumulating fund from pooling the savings of profit, interest and rent, even on a comparatively small scale, would always be able to buy. ”

“ 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 ”

“ 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 ”

“ It is then shown that interest on money-loans is paid because money affords special advantages as a medium of exchange, and the value of this property of money is traced to its ultimate utility, or, in other words, to the increment of productivity which the last addendum to the volume of money affords by facilitating the division of labor. ”

“ 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. ”

“ I set aside the outcry against the interest yearly paid to foreigners, as the produce of the sums vested by them in the funds, because I think ruin impossible, where the money borrowed at 4 or 5, is laid out at an interest of 6, 7, or even 10 per cent. ”