Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1889-03-24

conceptlon as Inc
power of compound
interest Secretary Maloney, of the Enter
prise Investment Company of Washington,
d. C., remarked to me during recent visit
to that city: 1.-THE common saying, money
grows does not half express the full import
of the term, if it is compounded. The
grass grows, but there is a period when it
does not grow, when the roots are dried up
scar and yellow leaf period, as we'll as
growing period, but money at interest, more
especially when compounded, grows when
you are asleep-night and day, sumMer and
winter, in good and bad times.''
Nobody understands its growing quality
better than the banks, brokers, building as
sociations and the lenders generally.
"But is this growing compouuding feat
ure rightly understood by the borrower,
from either bank or building association? I
think not" Said Chicago gentleman con-
nected with building association in that
city, to me recently.
WHAT A LOAN COSTS.
I asked the association what it would cost
me to make loan of $500. He said it would
take about 25 per cent premium, which,
added to the actual loan, would make 81, 900,
equivalent to ten shares Of stock, on which
would pay interest at the rate of 8 per
cent; my payments, which would be made
monthly, would be 80 cents a share
or S5; interest on $1,000 for one month,
Sc g.; total payment per month, $11 81,
which would be obliged to pay for eight
years until my stock reached par, which
would be S1.120 80; total cost of loan,
$500 80. But in reality would have had
the total amount of the loan but half of the
eight years, as would Immediately start to
pay back my loan in monthly payments as
soon as I received it. Therefore, in reality,
would have paid for the use of $500 for
four years interest to the amount of S640;
premium, 5000; actual cost, S840,
SIT struck me then that there
must be some enormous profits for
somebody in these Associations, and
I asked if the profits were shared alike by
both borrower and lender, and was told that
they were and that the only difference be-
tween the two was that one borrowed his
stock from the Association at the beginning
of the series and the other waited and got
his at the close of the deal. But is this SO ?
Let's see. The non-borrower pays into the
Association 80 cents month on one share
of stock, or total of $4S in eight years,
when his stock reaches par and receives 500
in return, making clear profit of $50. But
pause moment.
A GREAT DIFFERENoE.
While the non-borrower has paid the sum
or $48 in equal monthly payments of so
cents share, he in reality only had half of
$4S, or S24 in the association for 8 years.
The profit for one year would then be Sc 80
on $24, or over q per cent, which is not so
bad for mutual society with the ''mutu-
ality" nearly all at one end. AS the nom
borrower simply pays his installments and
none of the profits and the borrower pays
his installments and all the profits, it is plain
enough who is getting the best OF it. 1t
struck me there must be some immense
profit in lending money-even mutually"
~ at compound interest.
A well-known savings bank of this city
has recently published in the papers tables
showing the amount of the saving of 1 cent
a day for 40 years, and the Compounded"
total makes quite q respectable figure.
The table recalls to our mind the celebrated
saying of Peter Cooper, that it now takes
longer in this country to learn economy
than to learn trade, and without economy
to make "start" of what use is a COM
pound interest table?
AN ECONOMICAL EXAMPLE.
One need only go over on the Southside in
this city and note the number of iron work.
ers who have been making S. per day for 10!
these many years, living as tenants in houses
owned by other workers who made but 81 %
per day in those same years to emphasize
the difference between earning and
Saving"
Everybody knows that money makes
money, but not everybody pays attention to
., oJ,,. ~ IL -
about and its consequences. Take, for ex-
ample, laborer beginning life at the
meager pay of 81 per day. In visible stock
in trade he has nothing but pick or shovel.
Nevertheless he has capital, which, If
rightly used, is equivalent to Carnegie's
SO, 1000. He may increase 1t, diminish it,
waste it or throw it away, or multiply it and
compound" it for a rainy day, Just as
surely as the wealthy operator can with his
investment. Ten thousand dollars in United
States Government 8 per cents will only
yield $500 a year. The dollar-a-day la
borer invests his muscle against the $40, 900
capital, and has trife more to show for it
at the end of the year. Therefore, rude
strength, without a superabundance of in
telligence, is equivalent to a capital of
$4,000 year.
FORMS OF WEALTH.
Youth, health, capacity, etc., are capital
as well as money. Wages at 81 day pre-
suppose very little intelligence, very little
skill, very little responsibility. The skill
and industry of the average mechanic are
as productive elements fairly equivalent to
S25, 200, and yet that looks like big pile of
cash to the average toiler. If looked at
rightly his capacity is better capital, with
greater possibilities than the capitalists
$25, 900 bank account. But how few look
al it this way? The toiler is often given to
''booze" and politics, both OF which are
poor investments, and rather than study
the law of accumulation he would prefer to
attend meeting around the corner from
the postofice, the proceedings of which
would read about this way:
Speaker of the evening:
Gentlemen, there is no use of consuming
time. We all know just how we stand.
The question is now where (the toilers Join
hands), where, ! say, can we get two glasses
of beer for a nIckle?" They all voted ave-
"Then, gentlemen" said the speaker,
where can we get the nickle?" and then
the reporters were asked to retire while the
boys went into executive session TO take ac-
tion on the matter.
DON'T KNOW HOW TO SAVE.
Then there are people like the average
farmers who are disposed to be economical,
but don't know how. The know how is
good deal in this world. When General
jackson first went to Washington he was
charged % cents for shining his boots bv a