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which thence follow serve only to aggravate these symptoms. Hence the evils of these fluctuations cannot be charged to the currency itself, but to the improper use which is made of it. For, be it observed, these fluctuations and contractions have a bearing upon the prices of commodties only in so far as they originate in debt. They point directly to the hire of loans, not to the prices of commodities.
The tendency of increase of money is increase of all prices. This, we say, is the general tendency of increase of money; but this circumstance cannot of course exercise the same effects equally on every article of trade. The particular price of any article at any given moment depends upon demand and supply. The scarcity of articles in general use will enhance their price—the scarcity of demand will lessen their price. Many different elements enter into competition before the particular price of any article is established, and it may be a difficult matter, at all times, to trace their varied operation. Still, these may ultimately be all reduced, with regard to fixing a price, to the unfailing rule of demand and supply.
These general remarks may perhaps prove suggestive of further thought in connection with the subjects treated of. The whole has a highly iinportant bearing upon the proper consideration of the export and import trade of the country, regarding which we may at a future period have an opportunity of making some few observations. We now proceed to the more immediate object of inquiry contemplated in this article, namely, the effects of usury, or lending on increase, on the prices of merchandise as established by the laws of demand and supply. We think we will be able to show that the tendency of this system, with regard to prices, or rather with regard to the interests involved in the matter of prices, is evil and pernicious. There are many side issues here dependent, all exercising more or less pernicious influences on trade. But we propose to confine our attention simply to the effects borne by usury on prices. We discard, then, from our view, for the present, the influences which the mere increase of money bears upon the advance of prices.
The proposition which I advance is this : that wherever usury is evercised, it establishes, with regard to commodities, a code of prices beyond that which the consumer ought in justice to pay; and, with regard to wages, establishes a rate lower than the laborer and artisan ought to rereceive; or, in other words, it takes, without recompense, a share of the labors of community. This is the invariable tendency of usury, its last and one of its worst results, and here it persistently " bites," although paper money is the offspring of the usurious spirit, and indicates that spirit very fully developed, yet the evils which I now point out do exist, and would exist, independent of any such outgrowth as a paper currency, The establishment of all banks on a hard cash basis would certainly tend very powerfully to arrest, perhaps absolutely restrain, all coinmercial panics, but the more serious evils pointed out in this paper as the result of usury would exist as before, and exert undiminished force. money must be classed simply among the higher masterpieces of imposition and fraud. But the usury, or lending of money on interest, whether
. paper or gold, leaves its blighting effects persistently, daily, and without abatement on every industrial employment.
It will be admitted by all that the usurer is paid by somebody for the use of his money. The matter is to find out where this tax particularly falls, or in wbat manner it is taken out of the pockets of the community.
Let us suppose that two individuals, placed in about the same relative
position, are about to begin business in the manufacture of steam engines. The one has in hand $40,000 of his own which he invests at once in his business. The other has no money of his own to begin with, but by granting to the money lender some sort of security, he borrows the $40,000 at say eight per cent per annum, which he similarly invests. The credit man is loaded at once with a yearly tax of $3,200, and he looks to no other source than his business to yield the means of paying that tax. It becomes a continued charge upon the business in which he is engaged, and must be paid. There are only two ways by which he can make this interest forthcoming. He must either add the amount to the price of the engines, or deduct it from the wages of his laborers and artisans. There can be no doubt that ordinarily both the consumer or purchaser and laborer or artisan experience the effects of this tax upon their industry, though they may fail to appreciate it or trace it to its
The cash man, on the contrary, having no such tax to meet, is not only enabled to sell his engines, if he chooses, at a lower price, but to afford his men a better rate of wages. He is, in every way, enabled to carry on his business in a more satisfactory manner. We do not of course perceive, as the result of this system, two different scales of wages established in manufactures, or a cash rate and a credit rale. The current rate of wages, like everything else, is determined by demand and supply, and the effect of the mere demand of the cash and credit manufacturer will be distributed equally over both businesses. It would be possible for the cash man either to sell the engines lower or to pay his workers better wages by an amount equivalent to that which the credit man had to pay for the borrowed money. Or he might hire in more laborers than the credit neighbor and thus produce more material for the same money and reap all the benefit himself. The operations of the cash and the credit manufacturer bave a mutual action upon each other in determining the price. As a general thing, cash manufacturers will reap a certain advantage in the impetus given to enhanced prices by the great number of credit manufacturers. Had these two individuals begun business exclusively on their own means, the current price of their manufactures would have been determined mainly by the rules of demand and supply, the consumers and workers would have been benefited in general to the extent of the $3,200 per annum, and the credit manufacturer would, in every aspe
of the case, bave been in a better condition. It is worthy of note, also, that the collateral security, whatever that may be, given by the credit manufacturer, is loaded with a double risk : that which ordinarily and necessarily attaches to business of all kinds, and that which is imposed by the obligations of debt.
Let us now look at the case of imported goods. The importer who buys his goods in Britain, buys them from a wholesale merchant who has purchased them with borrowed money from a manufacturer whose looms have been moved by borrowel money. That importer himself imports them on borrowed inoney, in bottoms moved by borrowed money, and sell them in this country to traders, many of whom are also sustained by borrowed money. If we calculate the various taxes thus heaped upon the same goods, and the additional rates imposed to cover the losses and bad debts incurred to such an extent under the credit system, we are probably short of the reality in stating that imported goods generally are enhanced through usury twenty-five per cent ere they come into the consumers' hands. We assume that banking money is, on the whole, turned over by importers twice a year. We don't speak particularly of the influence borne on the prices of imported goods by the imposition of customs duties, from fifty to seventy five per cent of which may be charged to the existence of usury or borrowed money. Thus, if twenty per cent is imposed as duty, ten per cent of it and upwards owes its existence entirely to the accumulation of national debts, for the payment of the interest of which these customs duties are in part imposed.
The differences in the prices of goods must always be regulated according to the mode or period of payment. It would be absurd to sup- . pose that people can sell their goods as cheap on credit as for immediate cash. They must not only charge for the want of the use of their money, but also for the risk. Each credit purchaser therefore pays something more than the absolute price of the goods. He may be said to pay for his inability to pay, or for the use which he makes of the seller's capital for the period of credit. The risk of the credit has been amply verified by experience. As it is not known where this risk may particularly fall
, a general distribution is made of it, in the same manner as fire risks are distributed amongst the insurers. Prices are thus enbanced in two ways to every purchaser. The ancient fathers and canons of the church förbade selling on credit at a higher price than for cash, which was, in effect, to forbid credit altogether. Well would it bave been bad the precepts of these wise men been more regarded. The modern failers of the church, on the contrary, consider that a little debt, or as commerce calls it, a "reasonable credit,” is a very good thing. People thus become familiar with debt, and are taught to regard it as indispensable to human progress. Hence the ridiculous attempts to associate this debt with good reputation and character, and bence the strenuous endeavors of governments so sustain their credit, although over head and ears in debt. On no other point are people so exceedingly jealous and sensitive. A breath of suspicion may destroy their prospects for life. Is not this a melancholy commentary on that state of absolute dependence always associated, more or less, with credit?
To illustrate this subject still further, let us suppose that ten bales of cotton are disposed of tor $100, and that, before it comes finally into the manufacturer's possession, it changes bands six times by speculation. If the six ditferent securities taken for this cotton are discounted at six per cent, and have, on the average, three months to run, a tax of $36 is imposed upon the cotton in its raw state. If the notes had, on an average, six months to run, the tax would be $90. This is, on the whole, beyond the average rate of net trading profits in the community.
If the notes had twelve months to run, by renewal or o herwise, the tax imposed by usury on the $400 worth of raw cotton would then amount to $180. Most of the chief articles of consumption, such as snyar, tea, coffee, tlvur, wheat, change hands many times. When trade is brisk, or speculation
, active, the tendency is to inflate prices, for which the consumer must pay until the period of reaction comes. This is the harvest time of the banks, for an imperious necessity is laid upon all parties to ineet banking obligations. 'Keeping risk out of view, the oftener the goods change hands, the better will the money lenders fare. We are accustomed to be told that this activity or briskness of business is an index of prosperity. It is such, no doubt, to commerce, but quite the reverse to those vital interests upon which commerce rests, and without which it could not exist at all. Consumption in general goes on with very great regularity. The wants of a family to-day are the same as yesterday, this week as last week. The existence of debt does not afford us better clothing or food. When the credit system overreaches itself the community may be compelled to practice economy through the existence of debt or inability to buy. It is not therefore in the region of consumption that we must look for the causes of those irregularities, fluctuations, and convulsions which now so seriously affect commerce.
No great objection can be made to our assuming, as above, that mercantile bills have occasionally twelve months to run. Taking into consideration the fact of renewals, accommodations, and notes granted on account of composition and time, and that many notes are drawn ordinarily at six months, it is possible that the average of actual payments may be nearer twelve than three months. In this city (Montreal) the credit for goods varies from three to six months. As the principal sales, as to amount, are made at six months, the average may be stated at five months. It matters not that generally only short dated paper, or notes having only three months to run, are discounted at the banks. The credit is given, and must be paid for by the consumer accordingly. As to removals, the average amount of payment on promissory notes in all trades may be set down at from fifty to sixty per cent. The period of credit is, consequently, correspondingly extended. Notes given in bankruptcy vary, in time to run, from three months to three years.
We may look at this subject of prices from another and perhaps still more striking point of view. If the reader will glance at the tables in the banking department of this Magazine, he will find that the amount of loans specified in the returns of the principal banks throughout the country represent no mean sum. The banks of New York report a line of discounts of about 130 millions of dollars; of Boston, about half of that sum; of Philadelphia, nearly half of those of Boston; of New Orleans, about three-fourths of those of Philadelphia; and of Providence, about the same as New Orleans. These banks alone represent a total of loans of 260 millions of dollars. The banks of Canada report a line of discounts usually averaging thirty millions of dollars. These sums combined represent a total of 300 millions of dollars lent on hire. The interest of this vast sum at 7 per cent is 21 millions of dollars. But this does not indicate anything like the real amount paid for the hire of money. Mr. Colwell has given some valuable statisties on this point. He estimates the sums paid for interest and discount in and out of bank in the United States alone, during 1856, at $100,000,000! He assumes that the daily payments of New York city amounts to $30,000,000, and that the whole payments of the United States range to ten times this sum, or $300,000,000 each day. Were interest charged for the whole of this, it would amount to the almost fabulous sum of $900,000,000. Mr. Colwell estimates the amount paid yearly for interest as high as $450,000,000. The amount is probably overstated, for all these payments are not on account of discounted paper. The annual clearings of the banks of New York amounted, in 1857, to $7,000,000,000, or about $20,000,000 daily. Even at one-half of this estimate, the sum paid by the consumers throughout the United States for a so-called accommodation, as false and burtful as it is useless, would anount annually to the enormous sum of three hundred millions of dollars. We are inclined, however, to believe that a sum of one hundred and fifty millions of dollars may be set down as a safe estimate. If the banks throughout the United States reap a sum of $100,000,000, it gives to each of the 1,400 banking establishments a yearly profit of $70,000; $2,100,000 is the sum drawn out of the pockets of the consumers in Canada by the banking institutions of that colony. If we divide this among the ten chartered banks, it gives to each the snug sum of $210,000 yearly. If we calculate the interest upon other transactions in and out of bank, and the sums paid on account of the provincial debt, and of the thousands of mortgages throughout the country, we are probably not far astray in estimating the sum paid in Canada, on account of interest, at four dollars per head of the population. These are the suns which usury adds to the price of the goods we consume, and for no benefit whatever. It passes from the pockets of the many into the pockets of the few. The price the Americans pay annually in the way of a tax upon their goods for the use of this worthless commercial "wampum” is equal to one-fifth of all the capital employed in the United States in manufacturing, mining, and art, or more than double the annual yield of California gold ! Every man, woman, and child in the United States pays at least a sum of six dollars annually for the privilege of being robbed. These are the sums which usury is instrumental in adding to the price of every article of consumption, luxury, or use; or, in other words, the labor of the community suffers a loss equivalent to what is designated by these vast sums. And what is the recompense we receive? Positively worse than nothing. A fatal currency is introduced throughout the whole of the community—the men of commerce are reduced, by the blandishments and charms of a system as cruel as it is delusive, to stake their interests on a cast of the dice—the framework of society is periodically broken up, and its energies paralyzed, and the minds of all are kept in a state of nervous expectation and excitement, but ili suited either for the concerns of domestic life or the safe and steady progress of labor and commerce.
If these exactions were to end where they begin, there would not be so much cause of complaint. But it is impossible to confine them to commerce. They fall with the heaviest effect upon those who constitute the foundations of society—the agriculturists and laborers of the land. It cannot be alleged that these classes receive any accommodation from the banks; yet it is upon them, the backbone of the nation, that the burden is principally laid. We must trace all interests eventually to the soil, for the profit of the earth is for all, and the king himself is served by the field. Upon what principal of equity ought these important classes to be saddled, not only with a tax for which they receive not the remotest benefit, but at the same time with a currency liable at any moment to be dishonored ? All classes are indeed equally deceived with regard to the paper currency, because it drags down the value of gold to its own level, so that the gold is found to exercise no more exchangeable value than paper, and this circumstance is that which principally deceives the laboring classes into the belief that paper money is as good as gold.
I have said, in a previous article, that the possession of money, real money, either by a family or nation, ought ever to indicate that it has been received in exchange for articles of similar value. It is not easy to