{"collection":"philosophy-ethics","full_text_available":true,"graph_url":"https://unchartedknowledge.5gfusion.net/v2/api/page/gutenberg_62459/graph","html_url":"https://unchartedknowledge.5gfusion.net/v2/page/gutenberg_62459","id":"gutenberg_62459","license":"Public Domain (US)","rights_basis":"gutenberg_metadata_copyright_false","source":"gutenberg","source_url":"https://www.gutenberg.org/ebooks/62459","summary":null,"tags":["Category: Economics","Category: History - Modern (1750+)","Category: Law & Criminology","Category: Philosophy & Ethics","Usury"],"text":"USURY:\n  OR\n  INTEREST, PREMIUM AND DISCOUNT.\n\n  A LECTURE\n  DELIVERED\n  BEFORE THE STUDENTS\n  OF\n  CRITTENDEN\u2019S\n  Philadelphia Commercial College,\n\n  BY\n  S. H. CRITTENDEN,\n  Attorney at Law,\n  CONSULTING ACCOUNTANT AND PRINCIPAL.\n\n  PHILADELPHIA:\n  RINGWALT & BROWN, STEAM-POWER BOOK AND JOB PRINTERS,\n  Nos. 111 & 113 SOUTH FOURTH STREET.\n  1863.\n\n\n\n\n  USURY:\n  OR\n  Interest, Premium and Discount.\n\n  A LECTURE[A]\n  DELIVERED BEFORE THE STUDENTS OF\n  CRITTENDEN\u2019S PHILADELPHIA COMMERCIAL COLLEGE,\n\n  BY\n  S. H. CRITTENDEN, ATTORNEY AT LAW,\n  PRINCIPAL.\n\n\nOur subject to-day is USURY.\n\n\nWe will first speak of this subject in its direct relation to\nBook-Keeping. That is, as to its treatment under different forms, on\nthe Ledger, since this is in reality the phase in which it is of most\nimportance for us to consider it. Afterwards we will glance at the\nmatter in the view of utility, economy and legality.\n\nThe ledger titles which embrace this subject, are Interest, Discount\nand Premium. These are all often, and indeed generally, embodied in one\naccount, headed Interest, yet they are radically different divisions of\nthe account, both in their nature and manner of computation; although\nall tending to one point, when placed upon the merchant\u2019s books, viz:\nto add to his total gains or losses.\n\nMcCullock\u2019s Commercial Dictionary has the following definitions of\nInterest and Discount:\n\n\u201c_Interest_, is the sum paid by the borrower of a sum of money, or of\nany sort of valuable produce, to the lender, for its use.\u201d\n\n\u201c_Discount_, is an allowance made on account of an immediate advance of\na sum of money, not due till some future period.\u201d\n\n_Premium_, according to Webster\u2019s Dictionary, is \u201ca bounty, or\nsomething offered or given for the loan of money, _usually_ a sum\nbeyond the interest.\u201d\n\nThese definitions, though not full, will yet serve as a foundation\non which to construct an explanation that may make these terms more\neasy of comprehension. You perceive that in order to apply the\ndefinition of Interest, which I have quoted, we must look upon every\nperson who is indebted to another, as a borrower; that is, as having\nin his possession, certain property which belongs of right to that\nother person; and for retaining the use of which he must pay him an\nequivalent. If you consider in this light all transactions in which\nInterest is demanded and paid, this portion of the subject will perhaps\nbe sufficiently plain without additional comment.\n\nIt is in relation to the second division of the account that most\nconfusion usually arises. There are not less than three distinct\ntransactions, which are all included in the usual language of business\nmen, under the single term _Discount_. They are:\n\n1st. When a deduction is made for payment of a note or account before\ndue; 2d. When a per centage is taken off from a sale, in consideration\nof ready money; 3d. When money is remitted from one country to another,\nat an additional expense or at a loss.\n\nIf at an expense, it is sometimes called Premium.\n\nFor illustration, under the 1st division; suppose A holds a note\nagainst B for $500 due in four months, and B comes to-day and proffers\npayment; the custom is, for A to deduct the interest on $500 for four\nmonths, from the face of the note; and to accept the balance as payment\nin full: thus considering the use of the remainder of the amount,\nsufficient to compensate for the deficiency in the payment of the face\nof the bill. But this is manifestly incorrect, if we take the existing\nlaw of this State, which declares the value of the money to be but six\nper cent. per annum, to be founded on just principles. For the interest\non the remainder of the note, after deducting the interest on the face\nof the note therefrom, is not sufficient at the same rate per cent. to\nmake up the original sum. So that B, by paying thus in advance, secures\na larger rate of interest than is lawful. Yet this is the usage, and\nit is an old adage, and well established, that _usage makes law_. This\nis what is termed _Bank Discount_. _True Discount_, is such a sum, as,\nwhen deducted from the original debt, the interest on the balance will\njust equal the amount deducted. The method of ascertaining this is by\nproportion, or, as it is called in arithmetics, _rule of three_. Thus\nwe would say, as the amount of $100. and interest for the given time\nand rate is to the interest on $100. for the same time and rate, so\nis the total sum to the amount of discount to be deducted therefrom.\nStated thus,-- 102.00 : 2.00 :: 500.00 : the answer.\n\n2d. If C sells goods to D and within a certain limited time, usually\namong the jobbing trade of our city 30 days after purchase, D pays for\nthem in cash, usage again allows him a deduction from the face of the\ninvoice of say 5 per cent. This is also _called_ Discount, but it is\nnot properly such. For it is only a deduction of such a proportion or\nper centage of the bill, on fulfillment of certain conditions; while\nDiscount is reckoned with reference to time to run, as well as rate per\ncent.; in fine, Discount is simple Interest paid beforehand.\n\n3d. The term _Discount_ is also applied to that sum which is advanced\nbeyond or deducted from the amount of a debt, in remitting money from\none country to another.\n\nThus, if I wish to remit a sum of money to any foreign country, it is\nneedful for me to ascertain what is the difference of valuation at the\npresent time between money of the denominations used and ordinarily\nobtainable here, and those in the country to which the remittance is\nto be made. This valuation I suppose you all understand is a merely\narbitrary one, fixed at the will of the supreme power in any State, and\nvarying according to circumstances and the ideas of the law makers. If,\nfor instance, owing to the different amounts of alloy used in coining\npieces of corresponding value in different countries, there is say 5\nper cent. more precious metal in the coin of that country to which I\nwish to remit than in that of our own country, I must necessarily pay\nthis difference in addition to the original sum, in order to render\nthe account of my correspondent good according to the valuation in his\ncountry. If on the other hand the intrinsic value of our coin is 5 per\ncent. the greater, then one hundred dollars of our coin will pay one\nhundred and five dollars of the other.\n\nThe proper term for this is _Exchange_, and if this name were\nuniversally adopted, there would be far less of confusion in the ideas\nassociated with such transactions, in the minds of most persons.\n\nWe will now turn to a consideration of the peculiar nature of Interest,\nor more properly Usury, and the reasons assigned for a limitation of\nits rate by law. Formerly, the amount received in payment for the loan\nof capital, was denominated Usury; that is to say, rent for its use and\nenjoyment.\n\nThis is the correct term, for Interest is only the rent, or price paid\nfor the enjoyment of an object of value.\n\nBut this word has acquired an odious meaning, and is now understood to\nexpress an illegal and oppressive rate of interest only, the milder but\nless expressive term being substituted by common usage.\n\nIn earlier times, before the advantage and utility of a reserve\ncapital was known and appreciated, the demand of a rent for its use\nby lenders, was looked upon as an abuse of power, and an oppression\ntowards the needy. And, more still, it seems from the accounts handed\ndown to us by the writers of those days, that even that frugality,\nwithout which capital cannot be amassed, was looked upon as parsimony,\nand deemed a public injury, by the populace, who looked upon all sums\nnot spent by the great proprietors, as lost to themselves. They could\nnot comprehend that money laid by, as a capital for some profitable\nemployment, was to all intents equally spent; and that to in a way\nfar more beneficial to the poor. For a laboring man is never sure of\nearning a subsistence save where there is a capital in reserve for\nhim to work upon. This inability to understand its use gave rise to\nstrong prejudice against rich individuals, who do not spend their whole\nincome as it comes in; such a feeling still exists to a great extent:\nformerly it was universal. Lenders themselves were infected by it, and\nwere so much ashamed of the part they were acting as to employ the most\ndisreputable agents in the collection of profits perfectly just, and\nhighly useful to society.\n\nThere have been from time to time various species and modifications of\nstatutes, and enactments for the promotion of public liberty, and the\nadvancement of happiness, both private and public.\n\nYet, though these ordinances have been provided in all good faith, by\nthe legislators, it is evident to every person who observes closely,\nand compares causes and effects, that oftentimes their operation is\ninefficient for the end aimed at; and often directly the reverse in\neffect from the original intention of their makers. Especially, it\nseems to me, is this the case in the matter of those laws relating to\nUsury.\n\nThere exists almost universally, a sort of hereditary prejudice against\nthe very name of _Usury_. Almost every one will plead guilty to such\nfeelings as these: \u201cUsury is a bad thing, and as such ought to be\nprevented; Usurers are a bad sort of men, a _very_ bad sort of men, and\nas such ought to be punished and suppressed.\u201d Now, it is not wonderful\nthat men fall into such opinions, and become firmly grounded in them,\nwhen they hear them handed down and repeated by those to whom they are\nin the habit of looking with confidence for correct ideas.\n\nFor it cannot be expected that the mass of mankind should find leisure,\neven had they the ability, to examine into the grounds of a hundredth\npart of the rules and maxims which they find themselves compelled to\nfollow and observe. The fact is, that wherever it has been attempted to\nlimit the rate of Interest, or to abolish it altogether by law, there\nthe practice of Usury has uniformly revived. And, as might naturally\nbe expected, the more severe the penalties, and the more rigid their\nexecution, the higher the rate of interest was sure to rise. Because\nthe risk being so much greater, the lender must needs have a larger\npremium of insurance to tempt him to incur it. It is a matter of\nhistory, that at Rome, during the continuance of the republican form of\ngovernment the rates of interest were enormous. The simple and plain\nreason of this was, that the debtors who were always plebeians, were\ncontinually threatening their patrician creditors.\n\nSo also, in those Christian countries where Interest on loans has been\nforbidden, or what is equivalent, where it has been placed by law\nat so low a point as would not suffice to pay the risk of loss to a\nlender, the practice has been made over almost entirely to the Jews;\nwhile at the same time so great has been the extortion, oppression, and\nhumiliation to which this people were exposed that nothing short of a\nvery heavy rate of Interest could indemnify them for such risks and\nrepeated losses.\n\nThus in any case the ratio of the Premium of insurance, which\nfrequently forms the greater portion of what is called Interest, will\ndepend upon the degree of security presented to the lender. The greater\nthe risk, the higher will be the rate of Interest. When we detach from\nthe rate of interest all that is paid as a security to the lender\nagainst the risk of partial or total loss of his capital, it remains to\nconsider that part which is purely and simply Interest: that is to say,\nrent paid for the use of capital.\n\nThis is the point upon which many wise legislators have endeavored to\nlay down laws as infallible guides, and many learned economists have\nadvocated such restrictive enactments, as even to this day obtain in\nmost civilized countries. The Romans seem, according to _Cato_, to\nhave considered an Usurer, as worse than a thief. For, says he, \u201cOur\nAncestors, enacted in their laws, that a _thief_ should be condemned to\npay _double_, but an _Usurer_, _quadruple_.\u201d\n\nEven that most learned commentator on law, Sir Henry Blackstone,\npronounces that a legal limit ought to be placed to this branch of\ntrade.\n\nI will quote from Blackstone, on this subject. He says, when speaking\nof the general points in the contract of hiring and borrowing: [2 Com.,\np. 454,] \u201cThere is one species of this price or reward, the most usual\nof any, but concerning which many good and learned men have in former\ntimes very much perplexed themselves, and other people, by raising\ndoubts about its legality _in foro conscientie_.\n\n\u201cThat is, when money is lent on a contract, to receive not only the\nprincipal sum again, but also an increase by way of compensation for\nthe use; which is generally called _Interest_ by those who think it\nlawful, and _Usury_ by those who do not so; for those enemies to\nInterest, in general, make no distinction between that and Usury,\nholding any increase of money to be indefensibly usurious. And this\nthey ground, as well on the prohibition of it by the law of Moses among\nthe Jews, as also upon what is said to be laid down by Aristotle, that\nmoney is naturally barren, and to make it breed money is preposterous\nand a perversion of the end of its institution, which was only to serve\nthe purposes of Exchange, and not of increase. Hence the school divines\nhave branded the practice of taking Interest as being contrary to the\ndivine law, both natural and revealed: and the canon law has proscribed\nthe taking any, the least, increase for the loan of money, as a mortal\nsin.\n\n\u201cBut in answer to this it hath been observed, that the Mosaical precept\nwas clearly a political, and not a moral precept. It only prohibited\nthe Jews from taking Usury from their brethren, the Jews: but in\nexpress words, _permitted_ them to take it of a stranger; which proves\nthat the taking of moderate Usury, or a reward for the use, for so the\nword signifies, is not _malum in se_, (a sin in itself considered,)\nsince it was allowed where any but an Israelite was concerned. And\nas to the reason given by Aristotle, and deduced from the natural\nbarrenness of money, the same may with equal force be alleged of\nhouses, which never breed houses; and twenty other things, which nobody\ndoubts it is lawful to make profit of, by letting them to hire.\n\n\u201cAnd though money was originally used only for the purposes of\nexchange, yet the laws of any State may be well justified in\npermitting it to be turned to the purposes of profit, if the\nconvenience of society, (the great end for which money was invented,)\nshall require it. And that the allowance of moderate Interest tends\ngreatly to the benefit of the public, especially in a trading country,\nwill appear from that generally acknowledged principle, that commerce\ncannot subsist without mutual and extensive credit. Unless money,\ntherefore, can be borrowed, trade cannot be carried on: and if no\nPremium were allowed for the hire of money, few persons would care to\nlend it; or, at least, the ease of borrowing at a short warning, (which\nis the life of commerce,) would be entirely at an end.\n\n\u201cAnd as to any scruples of conscience, since all other conveniences\nof life may be either bought or hired, there seems to be no greater\noppression in taking a recompense or price for the hire of this, than\nof any other convenience.\u201d\n\nFor the taking of such recompense we have moreover, the very highest\nauthority in the words of our Saviour, who, in the parable of the\ntalents, censures the slothful servant in these words: \u201cThou wicked\nand slothful servant, thou knewest that I reap where I sowed not, and\ngather where I have not strewed. Thou oughtest therefore to have put my\nmoney at the exchangers, and then at my coming I should have received\nmine own _with Usury_.\u201d\n\nDr. Adam Smith, in his work entitled \u201cWealth of Nations,\u201d [Vol. 1,\np. 429,] published in 1776, and which has been long a text book for\npolitical economists, says: \u201cA capital lent at Interest may, in this\nmanner, be considered as an assignment from the lender to the borrower\nof a certain considerable portion of the annual produce; upon condition\nthat the borrower in return shall, during the continuance of the loan,\nannually assign to the lender a smaller portion, called the Interest;\nand at the end of it a portion equally considerable with that which had\noriginally been assigned to him, called the repayment. Though money,\neither coin, or paper, serves generally as the deed of assignment, both\nto the smaller and to the more considerable portion, it is of itself\naltogether different from what is assigned by it.\u201d And again: \u201cAs such\ncapitals are commonly lent out, and paid back in money, they constitute\nwhat is called the monied interest.\u201d \u201cIn some countries the Interest of\nmoney has been prohibited by law. But as something can everywhere be\nmade by the use of money, something ought everywhere to be paid for the\nuse of it. This regulation instead of preventing, has been found from\nexperience, to increase the evil of Usury; the debtor being obliged\nto pay, not only for the use of the money, but for the risk which his\ncreditor runs by accepting a compensation for that use. He is obliged,\nif one may say so, to insure his creditor from the penalties of Usury.\u201d\n\n\u201cIn countries where Interest is permitted, the law, in order to prevent\nthe extortion of Usury, generally fixes the highest rate which can\nbe taken without incurring a penalty. This rate ought always to be\nsomewhat above the lowest market price, or the price which is commonly\npaid for the use of money by those who can give the most undoubted\nsecurity.\u201d\n\n\u201cIf this legal rate should be fixed below the lowest market rate, the\neffects of this fixation must be nearly the same as those of a total\nprohibition of Interest.\u201d\n\n\u201cThe creditor will not lend his money for less than the use of it\nis worth, and the debtor must pay him for the risk which he runs by\naccepting the full value of that use. If it is fixed precisely at the\nlowest market price, it ruins, with honest people, who respect the laws\nof their country, the credit of all those who cannot give the very best\nsecurity, and obliges them to have recourse to exorbitant usurers.\u201d\n\n\u201cThe legal rate, it is to be observed, though it ought to be somewhat\nabove, ought not to be _much_ above the lowest market rate. If the\nlegal rate of interest in Great Britain, for example, were fixed so\nhigh as eight or ten per cent. the greater part of the money which was\nto be lent, would be lent to prodigals and projectors, who alone would\nbe willing to give this high rate of Interest. Sober people, who will\ngive for the use of money no more than a part of what they are likely\nto make by the use of it, would not venture into the competition. A\ngreat part of the capital of the country, would thus be kept out of the\nhands most likely to make a profitable and advantageous use of it, and\nthrown into those most likely to waste and destroy it. Where the legal\nrate of Interest, on the contrary, is fixed but a very little above the\nlowest market rate, sober people are universally preferred as borrowers\nto prodigals and projectors. The person who lends money gets nearly as\nmuch Interest from the former, as he dare take from the latter, and\nhis money is much safer in the hands of the one set of people, than\nin those of the other. A great part of the capital of the country is\nthus thrown into the hands in which it is most likely to be employed\nwith advantage. \u201cNo law can reduce the common rate of Interest below\nthe lowest ordinary market rate at the time when that law is made.\nNotwithstanding the edict of 1766, by which the French king attempted\nto reduce the rate of Interest from five to four per cent., money\ncontinued to be lent in France at five per cent.: the law being evaded\nin several different ways.\u201d\n\nPuffendorf, whose treatise on the \u201cLaws of Nature and of Nations,\u201d was\npublished in England in 1710, says: \u201cThe arguments which are brought\nagainst Usury are easily answered. It is urged that the loan of a\nconsumable commodity ought to be given gratis, because the loan of all\nother things is so. But I answer that I have the power of granting the\nuse of my goods that are not consumable either gratis, or for rent:\nwhereof, the one is a _loan_, the other a _letting_. So what should\nhinder me from granting the use of my money also, either gratis, or\nfor a certain recompense? When one man borrows to increase his wealth,\nor improve his condition, why should another lend to him for nothing?\nNay, \u2019tis an unreasonable thing, when you vastly improve your fortune\nwith my money, not to admit me to some share of the gain. For I, in\nthe meantime, am debarred from making that advantage which I might\nhave otherwise expected, by applying it to my own use. Besides, I have\nparted with something valuable, which ought therefore to be considered:\nfor in lieu of my money, I have only an action against your person,\nwhich cannot be prosecuted without some trouble. It may also happen\nby some accident that the debt may be lost. Nay, sometimes the debtor\nmust be courted and caressed, that it be not lost. And some borrow on\npurpose to make their creditors dependent on them. As, the Marechal de\nRochelause, when he was taxed by Louis XIII. with taking part with the\nDuke of Mayenne, pleaded in excuse, that he did not follow the Duke,\nbut his money: for his debt would be in a desperate condition if he did\nnot stick close to his debtor.\n\n\u201cBesides, it is not seldom that we lend to persons who are utterly\nunable to pay; and therefore some are of the opinion that it would be\nfor the advantage of the public, to allow none but merchants to take\nup money at use; for this would make the poor industrious, and force\nthem to frugality, who, some of them, are not afraid to pay Interest\nfor money to maintain their extravagancies. And monied men, rather than\nlet their money lie dead, would either take to merchandise themselves\nor would put out their money to those who do: which would make trade\nflourish to the great benefit of the commonwealth.\n\nGrotius is of the opinion, \u201cthat the legal interest ought to be stated,\nnot according to the gains of the borrower, but the loss that thereby\naccrues to the lender: as in buying and selling, and other contracts,\nno regard is had to what the receiver may make of the commodity, but\nwhat goes away from the seller.\u201d\n\n\u201cAnd in this case so much goes away as every man in his own calling\nmight, and usually does, make of his money; allowance being made for\nhazards, which in some cases are more, and in others less. With this,\nI so far agree: that no man can complain, if his debtor makes a vast\nand unexpected return of his money; but yet there is no doubt but I may\ndemand higher Interest of him that makes a very gainful trade, than I\ncan of another who drives a poor one.\u201d\n\nThese are the opinions of men learned in the science of political\neconomy; and are entitled to weighty consideration; but it seems to me,\nthey do not, any of them, reach quite far enough into the subject. All\nof them appeared to be fettered by the pressure of that same generally\nrecognized opinion to which I have before adverted.\n\nThe proposition I am inclined to favor on this much mooted point is\naptly expressed in the words of Jeremy Bentham. It is, \u201cthat no man of\nripe years, and of sound mind, acting freely, and with his eyes open,\nought to be hindered, with a view to his advantage, from making such a\nbargain in the way of obtaining money, as he thinks fit, nor, (what is\na necessary consequence,) anybody hindered from supplying him, upon any\nterms he thinks proper to accede to.\u201d\n\nThere are but two definitions which can be given to Usury. One is,\ntaking a larger rate of Interest than the law allows; this is the\n_legal_ or, _political_ definition. The other is taking more Interest\nthan is usual for other people to give and take; this is the _moral_\none. And now, in order that the law may touch the point, and actually\nprohibit Usury, it is needful first that the law should supercede\nmorals, or conventional custom, and _fix_ that point.\n\nOne thing is certain, that antecedently to custom, which has grown\nto be established conventionally, there could not be such a thing as\nUsury. For what rate of interest is more right than another? In one\nland ten per cent. is the legal and _therefore_ (as the advocates of\nlimitation would say) the proper rate; in an another five per cent. is\nthe utmost which the tender consciences of the legislators will allow.\nEven in the same country, from time to time, the rates are and have\nbeen varied as the wants of the community, the exigencies of the times,\nor the whims of the legislators prompted.\n\nIt is, then, convenience which has produced whatever there is of\ncustom in the matter. \u201cAnd what, (asks Bentham appropriately,) is\nthere in custom, to make it so much more deserving of observance than\nconvenience, which first gave it birth?\u201d\n\nIt is convenient for me to give 8 per cent. for money. \u201cNo,\u201d says the\nlaw, \u201cyou shall not.\u201d Why? \u201cBecause it is not convenient for your\nneighbor to give more than 6 per cent. for it.\u201d Can anything be more\nabsurd?\n\nThen again, as to the opprobrious name. No appellation or particular\nstigma of disrepute affixes to a man who being the owner of a house,\ngets as high a rent for it as he can. Indeed this is the common\npractice with such persons, and nobody is ashamed to do so, or\nprofesses to do otherwise. Now, why a man who possesses money, and\ntakes as much as he can get for it, say 8, 10 or 12 per cent. should\nbe loaded with vile epithets, any more than if he had bought a house\nwith it, and then made the same profit from renting the house, is more\nthan I can see.\n\nAnother point, in which the good policy of the existing restrictive\nlaws upon this subject, seems doubtful, is that they operate in only\none direction. If it is wrong, and worthy of punishment, to _take_ more\nthan the fixed maximum of interest for the use of money, why not make\nit a penal offence to _offer less_ than that amount, as well as to\naccept more?\n\nThere are divers reasons given by the advocates of the laws restricting\nthe rates of Interest why they are beneficial and ought to be enforced.\nAmong these are: that they _prevent_ prodigality, and protect the poor\nand simple from extortion and imposition.\n\nAs to preventing prodigality: does not every one know that so long\nas a person has money, or property of any sort, with which it is\npossible for him to display prodigality, no Usury laws will stop him\nfrom expending it; and, that after his property is gone and he has no\nmore to expend, none are more ready to _promise_ the largest Interest,\nproviding he can thereby obtain additional money to spend? for what he\ngets is clear gain, he having nothing to lose. This, it would seem is a\nhopeless class, for whose protection or advantage to legislate.\n\nBesides prodigals, there are three other classes, to whose benefit such\nrestrictive laws are supposed by their authors to insure. They are the\nindigent, the rashly enterprising, and the simple. That is to say,\nthose whose pecuniary necessities are so pressing, as to render them\nwilling to pay an Interest, above the ordinary rate, rather than not\nto have the money; those who from rashness, may be disposed to venture\nupon the giving such a rate without duly considering the consequence;\nand those whose natural carelessness combined with ignorance would lead\nthem to acquiesce in it.\n\nLet us look at the conditions of these classes a few moments. Here\nis a small trader we will say, whose stock in trade consists of only\na small amount of property, combined with an, as yet, perfectly\nuntarnished reputation for punctuality in payments. This last, all\nwho know anything of business, will at once admit to be the principal,\nand most important item of his stock. For with such a character, no\nmerchant will refuse to credit him for articles needful to carry on his\nbusiness; and thus all goes well with him.\n\nBut now his carefully cherished credit is in danger. He has been\ndisappointed in his expectations of a ready sale for some part of his\ngoods, or in obtaining money promised him for a debt, and finds himself\nwithout the means to promptly meet an obligation falling due to-morrow.\n\nHis position is such in the matter of property as not to render it\nworth anybody\u2019s while to lend him at the legal rate; in short he\ncannot raise money to meet this obligation at that rate, and must do\none of two things--either lose his credit, which will ruin utterly\nhis prospects of making a comfortable subsistence for his family; or\nhe must obtain the means of saving this cherished treasure intact, by\npaying somewhat more for the use of the money. We can at once see what\n_he_, who has every motive and means for judging rightly in the matter,\nwould decide to be the wisest course, and the one nearest the path of\nrectitude. As a matter of course, if he could obtain the money at a low\nrate, he would not pay the higher one. But now the legislator who knows\nnothing of any of these circumstances, but whose heart overflows with\nprudence, and loving kindness for the poor man, steps in, and says: \u201cIt\nsignifies nothing; you shall not have the money, for it would be doing\nyou a mischief to allow you to borrow on such terms.\u201d There might be\nworse cruelty, but not easily greater folly.\n\nNext, in regard to the ignorant and simple, for whose protection from\nimposition or fraud, these laws are enacted. First, could any degree\nof simplicity or want of tact be greater or more evident than that\ndisplayed in such a case as we have just spoken of; where a legislator\ncould confine a man under such circumstances, to a given rate of\nInterest?\n\nSecond, suppose the wisdom of the legislator to be never so much\ngreater than that of the individual, no matter how weak that may be,\nhow useless is the exertion of it in this case only, while there\nremains so many other occasions where the simplicity of the sufferer\nwould make him the victim of injustice, and where the legislator cannot\ninterpose to protect him. In every day affairs, in the matter of buying\nand selling, whether with money, or on credit, such persons are liable\nto be overreached; and yet none have thought that for this reason, a\nlegal price ought to be set upon all goods, of whatever description.\nNor, supposing that even this endless undertaking were accomplished by\nthe legislator, would it avail anything unless he also should regulate\nthe exact amount of each article which each man should buy.\n\nWhen matters arrive at this point, we find the person in the position\nof those for whom the law provides entirely, as not being fit to take\ncare of themselves: such are usually denominated _idiots_.\n\nAnd now, as we have considered at some length the needlessness and\ninefficiency of such legislation, let us for a few moments, look at\nsome of its evil results.\n\nWe will speak at first of those who are by this means virtually\nprohibited from obtaining money on loans. Consider for a moment, what\ndistress and inconvenience it would produce were the privilege of\nborrowing denied to everybody. Just that inconvenience is occasioned to\nthose people whose security would, if they were allowed to add a little\nof the rate of Interest, be sufficient to obtain the needed funds,\nbut is not sufficient for that purpose when such liberty is denied.\nThus the misfortune of not happening to be possessed of that amount of\nproperty which is considered a sufficient security, is made the ground,\nunder such legislation, of inflicting hardships upon a man, which those\nwho are so fortunate as to have such security do not suffer.\n\nThe only point of distinction between the two classes, is that the\nnecessity of one is greater than that of the other. For were this not\nthe case, they would not be willing, as we have supposed, to pay more\nto be rid of it.\n\nAnother ill effect, is that of rendering the terms of obtaining money\nso much the worse for many whose circumstances are such that they are\nnot altogether precluded from obtaining it, at some rate. Those who\ncannot borrow, may get what they want, so long as they have anything\nto sell. But, while out of loving kindness, or other motive, the law\nprecludes a man from _borrowing_, upon terms too disadvantageous, it\ndoes not forbid him from _selling_ at any, even the most ruinous rates.\n\nEverybody knows that forced sales are attended with loss: and to this\nloss an amount of Interest, which would at first seem exorbitant, would\nbear but a small proportion.\n\nWhen a man\u2019s goods are taken, and sold under an execution, it is\nconsidered a good sale if the net amount reaches two-thirds what it\nwould take to replace them again. In this way the kindness of the law,\ncosts him directly 33-1/3 per cent. at least; supposing, what is seldom\nthe case, that no more property was taken than just enough to satisfy\nthe claim. Now, if he had been permitted to hire the money at, say 12\nper cent. per annum it would require nearly three years for the same\namount to accrue, as interest, while the probabilities are that he\nwould be able to pay off the whole debt long before the expiration of\nthat period.\n\nTo the laws prohibiting Usury, too, we may look, as the prime cause\nof the establishment, and the strongest supporter of that branch of\nbusiness, which is ordinarily looked upon as so disreputable, and at\nwhose door are laid so many and grievious complaints of oppression,\n&c., viz: pawn-broking:--a business based only on the unsatisfied wants\nand necessities of that very class for whose protection from imposition\nsuch laws are made.\n\nSo we might multiply cases and arguments, but perhaps sufficient has\nalready been said to lead those who think, to the conclusion that is\nembodied in our proposition: viz: that every man ought to have the\nsame right to buy and sell money at a profit, as he has to do so with\nmerchandise or other property.\n\n\n[Illustration: _CRITTENDEN\u2019S PHILADELPHIA_\n\n_COMMERCIAL COLLEGE._\n\n_Established, 1844. Incorporated, 1855._]\n\n\n\n\nFOOTNOTE:\n\n[A] Entered according to Act of Congress, in the year 1863, by S.\nH. Crittenden, in the Clerk\u2019s Office of the District Court, for the\nEastern District of Pennsylvania.\n\n\n\n\nTRANSCRIBER\u2019S NOTES:\n\n\n  Italicized text is surrounded by underscores: _italics_.\n\n  Obvious typographical errors have been corrected.\n\n  Archaic or alternate spelling has been retained from the original.","title":"Usury; Or, Interest, Premium and Discount","tradition":"philosophy-ethics","translated_text":null,"word_count":6125}