, 1874-01-03

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| CAPITAL AND INTEREST.
Mr. John a. Schar, u workingman, in rcccn1
communication to this paper, argued against the
r1shtfu]ness Of interest Tor tather Of perpetual
interest) on capital, on tho ground that the rent
paid for the use Of houses coases with the iuevit-
able decay of houses, and thus becomes extinct
at the end Of, perhaps, fifty years on the aver
age. Why should rent be paid for the use OF
money in perpe.uo, while that paid for the use OF
houses is torminablo ct some tme-whether at
| the expiration Of 50 years or 500 makes no dif-
ference?
| The answer to Mr. sclaffs objection is. that it
! is not true that the rent paid for tho use Of q
| house, ship, railwny-car, OF any other form
| Of perishable capital. ever ceases An accident
may happen whereby tho house may be burned,
the ship lost, or the railway-car smashed, with
| out insurance, aud the rent thereupon cease. It
may happen, also, that by reason Of changes tn
| tho movement OF population, or the means Of
locomotion, tho house, ship, or car may become
valueless-nobody wanting to usot thom-in which
case also the rental value will cease as summazl-
" 80 though they had been destroyed by ire
In like manner q loan OF money uay be lost by
the failure or dishonesty of the borrower, and
thus the interest bo brought to a like termina-
ton. These accidental clements being eliminat-
cd, there ia no difference whatever between
tho house, and sum Of money equal in value
to the house, as to the perpetuity Of the rent or
interest derivable thercfrom-
Tho rent paid for house consists in part Of
ground rent and in part OF interest for the use
OF tho capital invested III the labor and materials
employed in constructing it. It is only the lat
the only part liable to decay. To say that the
owners of capital invest it in house-building
with the expectation and knowledge that at the
end Of fifty years, or any other period, it will
disappear entirely, while other forms Of invest
ment exist which are not subject to such disin-
tegration, is to impute to them 3 miscon-
ccption Of their own interests which they
have never been publicly charged With. The
price they f1 upon their houses is always sufh-
clent to pay ~ ground-rent, (2) taxes, (3) in
surance, ~ interest building capital, (5) wear
and tear. The aforementioned item ia intended
to include. and does include, enough to replace
the house when it wears out. Since houses are
very dur able as compared with most other kinds Of
property, 4 very small sum each yenr, compound
ed, is sufficient to replace the capital. Houses
can be aeen in the New England States in very
good preservation which have been occupied con-
tinuously more than 200 years, while in Europe
many tenements can be found that were erected
in the middle ages. But II We take fifty years
Is the average duration OF capital invested in
houses, one-laH Of per cent compounded will
suffice to keep the original capital intact, and
enable the owner to erect new house when the
old ono falls down.
It should he borne in mind that the rate OF in
terest charged for the use Of capital depends
largely upon the character Of the security.
The greater the risk the higher the
rate Of interest, and rice rersa. Houses
ere reckoned very high form OF
security, and ara preferred BY many investors
to Government bonds. Consequently the rate
Of interest Tor rent) is low relatively to most
other investments, and thus it may happen that
the minute portion Of the rent charged Tor wear
and tear is not obaerved- It nevertheless exists,
aud il the owner Of the house fails to get it he
comes that much short Of lis calculations. II
house-owners as 1ulo should fail to obtain this
portion Of their rent, house-building would cease
until tho demand for houses should bring up
Tue rent to the figure necessary for tho ultimate
replacement Of capital
It may be said that tlis is fne-spun theory,
ind does not hold good in practice,-tl,at no:-
the owner Of capital is at liberty to
invest in Government bonds and keep his capi- |
tal intact, he is still 80 blind to his own inter
ests that he viii put it into housebuilding, with
he certainty that he will lose 2per cent Of the
principal every year. II the occupants Of hired |
1ouseH in Chicago we're polled on this question, |
To venture to Say that SO in every 100 |
of them would be OF opinion that the landlord |
Sas no danger OF losing his capital at the end |
u fifty years or any other aasgnablo period short
II tho day Of judgment.