Legal Rates Of Interest

We have laws regulating the rato of interest. Many wise men have questioned the propriety of fixing the price of money by lav,and it is hought by some to be a s absurd as it would be to fix a legal tender for a bushei of wheat or potatoes. - We shall not discuss the point to-day, but our intention is to consider whether the present rates of interest are more favorable to the Capitalist or Laborer. In ordinary cases, the law prohibits the taking of a higher rate of interest than seven per cent. True, it does not forbid any man taking less than this amount, as five or six per cent for nstance, but it establishes a universal custom, and is equivalent in practico to a statute declaring that the rate of interest shall not be less than seven percent. As a general rule, one man owesanother because he has not the ready means of paying down for the values he receives of his neighbor. Thus the farmer owes the merchant because he has not the means of paying hitn till his crops come off. - He owes the la.vyer, doctor, blacksmith, &c, for the same reason. After a short time, these creditors want au equivalent for the use of their labor and capital until thedebtbe paid - ihat is, they want interest. Here the law steps in betwcen the contracling parties: and says to the creditor, "You shall not exact of the debtor more than seven per cent: and it says to the debtor, ■praclically, "You shall pay your creditor not less than seven per cent." Here, then, if the debt is te be cancelled in whole or in part by Labor, the luw has established an actual ratio between Capital and Labor. It has declared that for the use of every hundred dollars which the Working man owes the Capitalist, a certain amount of labor shall be performed by the debtor. The question is, does this rate of seven per cent favor most the Capitalist or the Laborer?To Qscertain this more fully, we propose io give a few incidents in the life of a young farmer of ïMiehigan. Edward Holton waseducated on a farm. He was a young man of good sense and unqucstioned moráis, but his early advantages of education had been limited. At the age of twenty-two, he married a young woman of the neighborhood, and and being desirous of eátablishing himself in a permanent home, he bought of his únele a farm of eighty acres, of which a small part was improved. He gave his obligations lor the farm, amounling to nve hundred dollars, which was lo be paid at the expiration of live years, wilh interest. Edward was industrious and persevering, but being poor and destitute oC all knowledge of agriculture except what hc had learned of his father, he did not succeed as well in meeting his pnymenls as he had expected. Sickness of himself and family - the failure of banks whosc prom'.ses he had taken in payment for his products - the low price of agricultural articles - the inconvenienciea consequent on the want ofsuitable buildings and tools, and the partial failure of his crops, diminished his gains, and cut short the payments upon his land. At length the five years expired, nnd Edward called on his uncle to settle. All the resource he could muster rom the hard earnings.of five years amounted to only one hundred and seventy-five dollars; and on computing thesum due, Edward had the mortification to find that all he had paid amounted only tothe interest, and he owed just exactly as much as he did at the time he gave his notes for the farm. He went home dejected and gloomy. - He was conscious that he had exerted himself faithfully to succeed in his business, and he imagined that there must have beensome great and radical error in conducting his affairs. He had kept an exact account of his receipts and expenditures, and he immediately entered on an investigaron of the cause of his great failure. He foundthat his farm which was his only capital, and for which he was paying seven per cent interest, for the whole five years past, had paid onlynve percent on me purcnase money, Jeaving two per cent ío be supplied from the avails of his industry. He was surprised at this result, for he had ofien heard his neighbors speak of seven per cent as a rate of interest which almost any kind of Capital vvould yield. But neither he nor his neighbors sufficiently regarded the fact that Capital is not productive unless it be used; and that white two thirds of a farm was covered with its prime val woodsj itcould not rationally be expected that the remaining one-third which was cultivated should pay a high rate of interest on the whole. But Edward calculated also the proceeds of his personal industry. He found that although there werc three hundred and lhirteen working days in the year, yet sickness, bad weather, religious and political meetings, holidays, and other circumstances so largely impaired their value, that the amount of his personal labor for the year was but one hundred and fifty six dollars, or about half a dollar o. day. The ten dollars which he annually paid his uncic for tho balance of interest not produced by his capital, uscd upltwenty days of rus time each ycar, or about one-sixteenth of the whole. " This he found was nn actual tax upoh him of ten dollars a year; and he was by so tnucli in a worse condition than he would have been had he possessed no capital at all. After ruminating for [somelime upon his prospects, Edward determined to work more and spend less,and endeavor-to learn from the best farmers in the neighborhood the more skilful modes of industry. In this way he hoped by the end of the five succeeding yeara to accomplish that for which he had.labored so long, without making the least advanco toward it. - But in the midst of these anticipations, he was interrupted by a visit from his uncle, who reminded him that the time for the payment of the whole sum was completed: that he was fairly entitled to his money, and i f he had receired it according to agreement, he could readily loan it for ten per cent under a new law of the State by which money loaned could legally draw that rato of interest, and proposed to him to renew the obligations at ten por cent interest. This proposition, although unexpectedby Edward, he could not well refuse, as his uncle had patiently waited for the payment of the debt. Ho accordingly gave new notes, bearing in. terest at ten per cent. Edward finds this arrangement to be harder than the preceding one, placing him almost in the condition of a serf.- His annual interest is fifty dollars, of which his farm pays one half, leaving twenty-five dollars to be cancelled by his industry. This requires not less than fifty days work each year, or about onesixth part of his time, for which he receives no compensación whatever. Ed ward is at a loss what to do. If he remain as he is, he must spend a considerable portion of his life in laboring without recompepsc. If he sells out, he places himself in the condition oí a dayborer, without any permanent home, and wit)) nn increasmg and more expensive family. If he purchase another fnrm, it must agfiin be oh credit, and on interest nlso, and he wil] place himself agaii: in precisely the same siluation in which he commcnued his carcer of difïiculties. Now we do nol pretend ihat the siluation of all farmers in Michigan who mny be in debt, is ss bnd as that of Edward Holton. Some farms are more profitablc: some farmers are more skilful; and at some penods the farming business is more profüable than at others, but we believe that a rigid examination would show that great numbers of them are hiring capital which does not pay its own interest, and the debtors, like Edward, make up llio diflerenco bv a vast amount of personal labor and toil by which ihey are never benefuted. But il ihepayment of the legal rates of interest presses thus heavily upon hini who has both Capital and Labor, it grinds slill harder upon the day laborer whose misfortunes or mismanogement have involved him in debt. How often a laboring man, through misfortune, becomes indebted to the merchant, the la-wyer or the physician, to the amount of a hundred dollars, and having no resource but his industry, he worksout his interest at fourteen days of labor a year, and perhaps a little of the principal, and so he continúes on through life, unlil the debl is practically cancelled by good fortune on the pnrt of the debtor, or by his sinking into astnte of hopelessand remedüess poverty. In this way a considerable share of the proceeds of Laborare abstracted from the pockets of the producer of wealth, and placed in the hands of the Capitalist. We do not complain of this as wrong in itself; nor so far as it is an evil, do we offer any legislative remedy. We merely cali attention to what we conceive to be the facts in the case, that those who intend to involve themselves in debt for the use of Capital may consider well whelher the proposed investment will meet its cost; or whether it will ultimately leave thoso who have contracted the obligations to cancel them by dishonorable ban kruptcy, or by the long continued and wearisome efibrts of personal labor.