Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1872-08-01
THE POWER OF INTEREST.



From the Boston Traveller.
The gradually increasing rate of interest
should make people wary of borrowing
money for speculative purposes, and espe-
cially Of hiring it for the purpose Of purchas-
ing unproductive property, or in the ex-
pectation of obtaining permanently high
rents. 1t is the high rate of interest which
every few years causes general breaking
up of business, when property and pro-
ducts fall in prices. This also il is
which causes wealth gradually but
steadily TO concentrate into the hands of
comparatively few persons in the com
munity. Take any series of ten, twenty,
or thirty years, or more, and the longer the
series the more positive and conclusive be-
comes the evidence of the fact, and it will
be seen that the most profitable business in
the world Is the lending Of money. The
higa rate of money, high rents and high
taxes must in the course OF a few years tend
to such concentration of wealth as cannt t
fail to be injurious TO society, and Will ulii-
mately so straiten the debtor CHASER as to
necessitate to a very great extent the process
of wiping out old accounts and beginning
anew. A few examples will be sufficient
to illustrate the great power of interest.
A man buys house for which he pays
$4,000. He leases it and charges the tea
ant seven per cent. upon its cost, clear
of insurance, taxes and repairs. The
rent is payable quarterly. A rate of inter-
est of seven per cent. per annum, paid
quarterly, will accumulaSe a sum equal
to the principle loaned or invested in
property in ten years. In the first period
of ten years, therefore, his rents build
him another as costly house as the
first. In twenty years bis rents build
three such houses; in thirty years,
seven houses; in forty years, fifteen
houses; in fifty years, thirty-one houses
in sixty years, sixty three houses; aud in
seventy years one hundred and twenty
seven houses. Ia seventy years all these
are built from the accumulated rents of one
house. These houses are worth $I,270,-
900, which sum has been paid for by seventy
years rents Of one house worth SIC, 600. IT,
instead of being invested in the house and
lot, the $4,000 were loaned on interest,
at seven per cent, and the interest collect
ed and reloaned quarterly, the money would
accumulate precisely the same amount as
the property.
Take another illustration of the power of
interest. Two mechanics Just come of age
are good workmen and DESTROYS Of becom-
ing rich. Each is able TO earn a dollar
day over and above his expenses. Every
six months they invest the money thus
earned at seven per cent. interest, the inter
est payable half yearly. These men earn
al average Of IA dollar day besides their
expenses three hundred days in
each year, during forty years and four
months. Their ae is then sixty years and
four months. Each earns by labor $500 per
year for forty years, or, Tor the whole Pc
Rod, ,120-together $24, 200. But the
interest on their returns, loaned half-yearly,
for period Of forty years and four months,
doubling at seven per cent, paid and rein
vested half-yearly, in ten years and four
months amounts to $104, 550.70, which
added to the amount of $24, 200 earned by
their labor, makes the aggregate S128,-
750.T0. The interest on the sum
of S24, 200 earned by their labor is
$104, $50. T0-more than four and quarter
times greater than the amount they have
earned by their labor. Suppose the two
men to live twenty years aud two months
longer, that is to the age of eighty-one years
and six months, and continue to loan their
money. During this period it would double
twice, making the total accumulation in
sixty years and six months S515, 002.o0.
The two men do not labor during the last
twenty years and two months, and expend
of their income for living during that period
SIS, 002 so, leaving to their heirs $500 900. In
40 years and four months they earn by their
labor $24, 200 and live twenty years and
two months on their money without labor.
Subtract the money earned by labor, S24,-
200, and the remainder accumulated by in.
terest is S475,S00. Now, not one dollar of
this S475, 900 is earned by the labor of these
men. It Is the legal interest upon $24 200.
These men live laboriOusly, and work for
very moderate compensation. They take
only the legal rate of interest. Neither do
they enter into any speculations.
The amount to which these nations, mu-
inequalities and corportions, as well as indi-
viduals, are indebted, is a subject of general
complaint. We see here the cause. It is an
accumulation of interest. 1t is an aecumu-
lation of interest from which either no ade-
quate equivalent is obtained, or else Il ia lost
by unwise management. There Ia due to
the estate Of these two men, from the small
savings Of . dollar day, sum Of $500, coo.
1t would take the labor of single man for
more than 1866 years to pay his principal;
aud it would require, at one dollar per day,
the constant toll of more than 1l6 men to
pay the yearly interest of $4,000. From
generation to generation these men might
have continued to pay the interest, and still
the burden undiminished, and yet in the
short space Of sixty years and SIX months
two men, from the small savings of dollar
day, aided b Y tie power of interest, have
accUmni.aated this amount.
Take one more example on national
scale:
Interest on money at six per cent. per
annum, payable halfyearly, will double
the principal in eleven years eight
months and twenty days; but for con-
venience we will call it twelve years.
One thousand dollars loaned at six per
cent. in twelve years will accumulate TO
s., 900, in twenty-four years to 81, 900; in
thirty-six years to $4,000; in forty-eight
years to $4,000; in sixty years to $4,000;
in seventy-tWo years to S64, 900; in
eighty-four years to S12S,000; in ninety
six years to $2j6, 5000; in los years to S512,-
300; in 120 years to S1,024,000. Multiply
his sum by 1924 and it will give the aecu-
for 120 years more, or 81, 04S,576,-
300. Multiply this product by 1924 and |
re shall have the accumulation during the |
next 120 years, or period of 800 years
81, 075, TAI, 1924, 000-One trillion, seventy |
hree billions, seven hundred and forty -One |
eight hundred and twenty-four |
thousand dollars.
This is rather an incomprehensible |
AMOUNT for even nation to manage, but |
perhaps we can make use of one years inter- |
st on the sum, which amounts to So, 424,- |
,09, 440 or over $50 minute fOrevery minute |
n the age of the world, allowing it to be |
1000 years old. Or if this calculation is too |
to be readily apprehended, we |
an take the interest of it for four months
md pay off our whole national debt. So |
much for the power of legal interest.
MRS. A. CENTURIA, of North Charleston,
Vest Virginia, celebrated her Tooth birth
ay last week. The career of this lady is a
most remarkable one. She was in Paris at
be time and saw the execution of Louis
wi; was introduced to Napoleon /, at bis
In, 1901 md vvaa a YaiOTainO haaI1- !