The daily gazette., 1881-06-09
The Rate OF Interest.

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ed that is too often lost sight of.
Wages represent the return upon en-
pl0yed labor which II permitted to
accumulate becomes capital, which is
invested in turn, and the rate of ins
terest then represents the return up
on employed capital. The result OF
the economic infiuences that have
been ut work in this country during
the past two years has been to IN
crease the wages Of labor and dimi-
nish the WAGES Of capital in much
greater proportion. For years past
the rate of interest has been from
five to seven per cent, and safe In
vestments have been 0btainable
which would return that percentage.
Since the resumption ofspecie pay
ments all this is changed. The Coy
ernment has been reducing the rate
Of interest with relentless hand
which has borne upon capital with an
uncompromising grasp. The fve-per-
cent. bonds which were issued with
the expectation of their remaining
unredeemed for ten years longer
have been called In and their holders
have been ,glad to accept in their
steadsthree and half per cents, re-
deemable at the pleasure of the Gov
ernment. The helders Of sixsper-
cent. bonds have been compelled to
submit to a reduction on an even
crater proportion. And all the while
the Government has been calling
bonds almost every month and
throwing more and more money up
on the market to seek profitable en-
ployment. States have been paying
of six and seven-per-cent. bonds and
offering their holders instead four per
cents, and the great cities of the
country have also been reducing the
burden of their debts.
The railroad corporations of the
country have not been slow to take
advantage Of the situation, and with
In the past few weeks no less than
half dozen corporations have bor-
rowed money ct four per cent. for .
long term Of years, IN most cases for
the purpose Of meeting obligations
bearing o higher rate of interest.
| This 10 O serious matter for estates
and corporations. This change In the
value OF money means real hardship
for many families who lived in COM
parative comfort during the hard
times that have now passed away.
The father who left his family S25, ,0GO
| in United States six-per- bonds
ten years ago secured then an income
Of 81, 800 per annum, which is now
shrunk to $875-A reduction far great
or than labor is called upon to endure
even In the most unfortunate seasons.
Nor is this sd. The law prescribea
what class of Investments may be
made bysmanagers Of tausts, and the
amount of such trusts far exceeds the
supply Of legal investments. For this
r son the prudent trustee finds him.
self confronted with an inevitable
loss Of principal. An investment in
city skies at the ruling prices must re-
suit in sacrifice of twenty to twenty
ave per cent. Of the principal, for such
are the prices of city securities that
twenty-five to thirty per cent. above
their par value must be paid In pre-
miums. The life insurance companies
have not yet begun seriously to feel
the effect Of this change In the none"
tary situation, as they win in the i'm
mediate future, when their loans are
paid of.
Their reserve was calculated on . foul
and tonr-and-a-half per cent. basis
when the rate Of interest was six and
seven, and when their accumulation
netted them SIX to eight per cent. pei
annum. Now, when they are unable tt
make them earn more than four or hver
the dividends of the mutual companies
must be materially reduced, and stock
holders of fire insurance companies mus
be content with smaller returns.
Finaaciers are puzzled to tell how lonl
this condition of affairs can last. CheaE
money encourages new enterprises AND
constantly develops new means OF en-
ployment. some Of these Will prove re
munerative others must result IN loss
When this stimulus Ii thoroughly felt w
shall find that competitor for the use o
money which will enhance Its values
competition which will diminish the
market vslue of the low rate of interes
securities and possibly bring about q
era of speculation which can only ter
,, inmate In serious loss to the country
Such time 10 not yet at hand, for th'
supply of capital continues far In Excess
of the demand. That demand 10, how
ever, rapidly growing and 1t 10 question
Of perhaps not more than few monthl
when money will command much highel
prices and stocks must decline ne.-Pres'