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rate you set, profits not the lenders; and very few of the borrowers, who are fain to pay the price for money, that commodity would bear, were it left free; and the gain is only to the banker: and should you lessen the use to four per cent., the merchant or tradesman that borrows would not have it one jot cheaper than he has now; but probably these two ill effects would follow: first, that he would pay dearer; and, secondly, that there would be less money left in the country to drive the trade: for the bankers, paying at most but four per cent. and receiving from six to ten per cent. or more, at that low rate could be content to have more money lie dead by them, than now, when it is higher: by which means there would be less money stirring in trade, and a greater scarcity, which would raise it upon the borrower by this monoply; and what a part of our treasure their skill and management, joined with others’ laziness, or want of skill, is apt to draw into their hands, is to be known by those vast sums of money they were found to owe, at shutting up of the Exchequer: and though it be very true, yet it is almost beyond belief, that one private goldsmith of London should have credit, upon his single security, (being usually nothing but a note, under one of his servants' hands) for above eleven hundred thousand pounds at once. The same reasons, I suppose, will still keep on the same trade; and when you have taken it down by law to that rate, nobody will think of having more than four per cent. of the banker; though those who have need of money, to employ it in trade, will not then, any more than now, get it under five or six, or as some pay, seven or eight. And if they had then, when the law permitted men to make more profit of their money, so large a proportion of the cash of the nation in their hands, who can think but that, by this law, it should be more driven into Lombard-street now? there being many now, who lend them at four or five per cent. who would not lend to others at six. It would therefore,
erhaps, bring down the rate of money to the borrower, and certainly distribute it better to the advan
tage of trade in the country, if the legal use were kept pretty near to the natural; (by natural use, I mean that rate of money, which the present scarcity of it makes it naturally at, upon an equal distribution of it) for then men, being licensed by the law to take near the full natural use, will not be forward to carry it to London, to put it into the banker's hands; but will lend it to their neighbours in the country, where it is convenient for trade it should be. But, if you lessen the rate of use, the lender, whose interest it is to keep up the rate of money, will rather lend it to the banker, at the legal interest, than to the tradesman, or gentleman, who, when the law is broken, shall be sure to pay the full natural interest, or more; because of the engrossing by the banker, as well as the risque in transgressing the law: whereas, were the natural use, suppose seven per cent. and the legal six; first, the owner would not venture the penalty of the law, for the gaining one in seven, that being the utmost his yield : nor would the banker venture to borrow, where his gains would be but one per cent., nor the monied man lend him what he could make better profit of legally at home. All the danger lies in this; that
your trade should suffer, if your being behind hand has made the natural use so high, that your tradesman cannot live upon his labour, but that your rich neighbours will so undersell
you, that the return you make will not amount to pay the use, and afford a livelihood. There is no way to recover from this, but by a general frugality and industry; or by being masters of the trade of some commodity, which the world must have from you at your rate, because it cannot be otherwhere supplied.
Now, I think, the natural interest of money is raised two ways: first, When the money of a country is but little, in proportion to the debts of the inhabitants, one amongst another. For, suppose ten thousand pounds were sufficient to manage the trade of Bermudas, and that the ten first planters carried over twenty thousand pounds, which they lent to the several tradesmen and inhabitants of the country, who living above their gains, had spent ten thousand pounds of this money, and it
were gone out of the island; it is evident, that, should all the creditors at once call in their money, there would be a great scarcity of money, when that, employed in trade, must be taken out of the tradesmen's hands to pay debts; or else the debtors want money, and be exposed to their creditors, and so interest will be high. But this seldom happening, that all, or the greatest part, of the creditors do at once call for their money, unless it be in some great and general danger, is less and seldomer felt than the following, unless where the debts of the people are grown to a greater proportion; for that, constantly causing more borrowers than there can be lenders, will make money scarce, and consequently interest high. Secondly, That, which constantly raises the natural interest of money, is, when money is little, in proportion to the trade of a country. For in trade every body calls for money, according as he wants it, and this disproportion is always felt. For, if Englishmen owed in all but one million, and there were a million of money in England, the money would be well enough proportioned to the debts: but, if two millions were necessary to carry on the trade, there would be a million wanting, and the price of money would be raised, as it is of any other commodity in a market, where the merchandize will not serve half the customers, and there are two buyers for one seller.
It is in vain, therefore, to go about effectually to reduce the price of interest by a law; and you may as rationally hope to set a fixed rate upon the hire of houses, or ships, as of money. He that wants a vessel, rather than lose his market, will not stick to have it at the market-rate, and find ways to do it with security to the owner, though the rate were limited by law : and he that wants money, rather than lose his voyage, or his trade, will pay the natural interest for it; and submit to such ways of conveyance, as shall keep the lender out of the reach of the law. So that your act, at best, will serve only to increase the arts of lending, but not at all lessen the charge of the borrower: he, it is likely, shall, with more trouble, and going farther about, pay also the more for his money; unless you intend to break
in only upon mortgages and contracts already made, and (which is not to be supposed) by a law, post factum, void bargains lawfully made, and give to Richard what is Peter's due, for no other reason, but because one was borrower, and the other lender.
But, supposing the law reached the intention of the promoters of it; and that this act be so contrived, that it fixed the natural price of money, and hindered its being, by any body, lent at a higher use than four per cent., which is plain it cannot: let us, in the next place, see what will be the consequences of it.
1. It will be a loss to widows, orphans, and all those who have their estates in money, one-third of their estates ; which will be a very hard case upon a great number of people: and it is warily to be considered, by the wisdom of the nation, whether they will thus, at one blow, fine and impoverish a great and innocent part of the people, who having their estates in money, have as much right to make as much of the money as it is worth, (for more they cannot) as the landlord has to let his land for as much as it will yield. To fine men one-third of their estates, without any crime, or offence committed, seems very
hard. 2. As it will be a considerable loss and injury to the moneyed man, so it will be no advantage at all to the kingdom. For, so trade be not cramped, and exportation of our native commodities and manufactures not hindered, it will be no matter to the kingdom, who amongst ourselves gets or loses : only common charity teaches, that those should be most taken care of by the law, who are least capable of taking care for themselves.
3. It will be a gain to the borrowing merchant. For if he borrow at four per cent., and his returns be twelve per cent., he will have eight per cent., and the lender four ; whereas now they divide the profit equally at six per cent. But this neither gets, nor loses, to the kingdom, in your trade, supposing the merchant and lender to be both Englishmen; only it will, as I have said, transfer a third part of the moneyed man's estate, who had nothing else to live on, into the merchant's pocket;
and that without any merit in the one, or transgression in the other. Private men's interests ought not thus to be neglected, nor sacrificed to any thing, but the manifest advantage of the public. But, in this case, it will be quite the contrary. This loss to the moneyed men will be a prejudice to trade: since it will discourage lending at such a disproportion of profit to risque; as we shall see more by and by, when we come to consider of what consequence it is to encourage lending, that so none of the money of the nation may lie dead, and thereby prejudice trade.
4. It will hinder trade. For, there being a certain proportion of money necessary for driving such a proportion of trade, so much money of this as lies still, lessens so much of the trade.
the trade. Now it cannot be rationally expected, but that, where the venture is great and the gains small, (as it is in lending in England, upon low interest) many will choose rather to hoard up their money, than venture it abroad, on such terms. This will be a loss to the kingdom, and such a loss, as, here in England, ought chiefly to be looked after : for, we having no mines, nor any other way of getting, or keeping of riches amongst us, but by trade; so much of our trade as is lost, so much of our riches must necessarily go with it; and the over-balancing of trade, between us and our neighbours, must inevitably carry away our money, and quickly leave us poor and exposed. Gold and silver, though they serve for few, yet they command all the conveniencies of life, and therefore in a plenty of them consist riches.
Every one knows that mines alone furnish these: but withal it is observable, that most countries, stored with them by nature, are poor : the digging and refining of these metals taking up the labour, and wasting the number of the people. For which reason the wise policy of the Chinese will not suffer the mines they have to be wrought. Nor indeed, things rightly considered, do gold and silver, drawn out of the mine, equally enrich, with what is got by trade. He that would make the lighter scale preponderate to the opposite, will not so soon do it, by adding increase of new weight to the