FARMERS^ REGISTER— ESSAY ON USURY LAWS- 



101 



formerly, interest was fixed at 12-^ per cent., and the 

 republic of Genoa paid only ironi seven to ten 

 per cent, on borrowed -capital. It is upon this 

 pi-incipje that Storch -explains the d-iffcrence be- 

 tween the rates of interest in the United States, 

 and Russia. Profits ■ are no doubt higher here 

 generally than in Russia, and yet the marketable 

 rate of interest is higher in Russia than in this 

 country. The difference arises, says he, in the 

 difference in the laws and administration of justice 

 in the two countries. Capital is more secure here, 

 contracts more rigidly enforced, and consequently, 

 the risk of lending money less than in Russia. 

 In the Alahomedan countries where capital is in- 

 secure and liable to be seized on by the rapacious 

 Pachas as soon as it makes its a])pearance, there 

 is- a disposition to hoard; and besides .this, the law 

 positively forbids any interest.whatevcr on money, 

 and the consequence of these combined causes, 

 says Montesquieu, is to increase the risk greatly 

 beyorki what it is in better governed countries, and 

 consequently to produce most frightful usury in all 

 cases where- money is actually lent. Interest is 

 said to- be ten or twenty times as high ordina- 

 rily in those countries, as in Europe. Upon the 

 same principle we may account for the exoibitant- 

 ly high interest observed by Adam Smith to exist 

 in Bengal, and the East Indies generally. If the 

 stay and relief laws of Kentucky had been long 

 continued, or should be frequently enacted from 

 tirhe to time, so as to destroy the contltience of the 

 community in the honesty of government, and 

 the validity of contracts,, we should -witness in 

 this country the same exorbltarit interest, the 

 same frighttlil usury, which is now observed in 

 the Maliomedran countries, and the east. 



r ha.ve thus given you, I hope, a satisfactory 

 analysis of profits and risk, the two elements or 

 ir^gredients of interest, and have found the latter 

 still more fluctuating and uncertain than the 

 former. How absurd then must be the usurj- 

 laws, which endeavor to hmit and fix the rate of 

 interest, which depends on elements that no hu- 

 man Avisdom or power on earth can ever con- 

 trol and regulate? I should as soon expect to make 

 the fabled Isle of Dclos stalionar-y upon the mov- 

 ing billows as to fix that which so essentially de- 

 pended upon two such unstable elements. The 

 other branches of the argument against the usury 

 laws are but corollaries to this main proposition, 

 which I have been attempting to establish. I 

 chall now proceed to inquire into the manner in 

 which these laws operate upon the public pros- 

 perity and moralit}-, 



II. Pernicious influences of the Usury Laws. 



First then we assert, and the assertion requires 

 no proof, that the usury laws are unjust and une- 

 qual in their operations, restraining tlie holders of a 

 particular species of capital from employing it in 

 the most lucrative manner, whilst the holders of 

 other species of capital are left in the enjoyrasnt 

 of perfect liberty. The owner of lands and slaves 

 may take what rent and hires he pleases — the 

 merchant is not restrained as to his gains, nor the 

 manufacturer to his, profits. Why then should 

 the money holder be prevented from takfng the 

 interest which the borrower is willing to give? Is 

 it because the money holders are vicious, selfish 



press and discountenance? I apprehend not. 

 Widows, orphans, the defenceless and helpless, 

 are often the money holders. When a lather dies, 

 to whom does he leave his money? JNIost fre- 

 quently to the invalid son, or the exposed arnl de- 

 fenceless daughter. To his sons who are fitted 

 for action on the great theatre of life, he gives 

 other kinds of property which require more skill 

 q,nd care to manxige them. The salaried men 

 and all the functionaries of society are to be ranked 

 among the money holders: Are these cla-ses of 

 such a character as to require the strong h-cxnd of 

 legislation to correct their mal-practices? Cer- 

 fainlj' not. As a class, I should say tlie money 

 lenders are generally speaking, the most harmless 

 and defenceless, or the most talented and respecta- 

 ble m.embers of society. Is it because money is 

 a commodity sui generis, the holder of which is 

 enabled by its means to take what interest he 

 pleases, the borrower being obliged to give, it? 

 There are- man}-) I believe, Avho absurdly entertain 

 this ophiion — who really believe that money is in 

 the economical world what the superstitious be- 

 lieve the witches to be in the physical, a some- 

 thing not bound down and governed by the laws 

 of gravity and- cohesion. — by the laws, of supply 

 and demand, but as possessing an active principle 

 of its own, a sort of vis iasita, of the most dan- 

 gerous ch-aracter, not only not governed by the 

 ordinary la^vs of nature, laut capable by its own 

 energy, of resisting and deranging tliem. Those 

 who entertain such an opinion however, either do 

 not or cannot understand the nature of the circu- 

 lating medium, and the laws which regulate the 

 rate of interest. Interest,like the priceofeveiy thing, 

 is determined in the market, by a strug-gie be- 

 tween the borrower and lender; the' former of 

 course wishing to fix it as low as possible, while 

 the latter would make it as high as possible. 

 When profits are high, or much is to be made by 

 the use of capital, or the risk is great, more wiU 

 be demanded on the one side and coiiceded on the 

 other, than "u-hen the reverse is the case. Capi- 

 talist competes with capitalist, as well as bor- 

 rowei Avith borrower: where nmch is to be made 

 by money, much -Cvill be given; where little is to be 

 made, little Avill be given. Hence in the new states 

 of our confederacy, interest is much higher than in 

 the old, because more can be made by the use of 

 money. In Alabama for example, eight per cent, in- 

 terest may be legally taken, in JNlississippi ten, in 

 Louisiana ten, in Indiana ten, in Illinois twelve 

 and a half, and Missouri ten, — and it is believed 

 these rates are generally rather below the marketa- 

 ble rate of interest in those new states: whereas in 

 a;ll the old states, with the exception of New York, 

 South Carolina and Georgia, six per cent, is the 

 legal rate, and perhaps in most cases nearly coin- 

 cident with the average market interest. 



The interest of monej', it must be remembered, 

 does not depend on the quantity of money in the 

 countr}', but upon the whole quantity ofcapital, (of 

 which money is one, and b}^ no means the most 

 valuable item,) compared with the channels of 

 pjfofi*^able investment. As I have already said, 

 when money is borrowed, it is not the monej^, but 

 the ■raonoy''s worth which is wanted. The mer- 

 chant Avants goods, the agriculturist new lands, 

 or improvement of old land; the manufacturer 

 wants machines and raw materials; the lawyer 



beings, whom it is the policy of the laws to sup- 1 wants ' education and professional skill. They 



