The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1891-04-02
VIEWS OF A POLITICAL ECONO.
MIST ON THE PENDING USU-
RY AND TAX LAWS,
W1LLMAR, Mimi, March * 1870,

RY AND TAX LAWS.
WILLMAR, Mimi, March g. 1891
DEAR SIR: You request me to give you my
views on the proposed usury laws now pend
ing before the Minnesota Legislature The
subject has been one of long and careful
study on my part and the following are my
conclusiOns
Usury laws cannot and do not decrease the
interest upon money, but can, and do, and
always will, increase rates. This is so per-
fectly plain on principle, and is so unVer-
sally attested by practical experience, that
the man who will either think or observe can
not avoid tn 8 conclusion.
Money Is the most cautious of all kinds of
property. 1t flies at the least approach of
danger. 1t is not obliged to remain in any
locality as is real property. Its transporta-
ton and removal costs nothing as does that
of other forms of personal property. When,
therefore, its owner is alarmed or dissatisfied
with it's present place of investment, he can,
with but very little trouble or expense, re-
move it to other places. Quite as true is it,
that the great bulk of lOanable funds seeks
absolute safety, rather than high rates of in
terest Witness the vast sums invested in
government and other undoubted securities,
at two and a half to three per cent per an
mum.
The question for us is do the penalties and
forfeitures OF usury laws compel men to
loan their money cheaper or do they drive
money out OF the State, and thereby make it
scarcer and harder to get? If usury laws do
make iHterest lower, then surely we ought to
have them, and make them good and strong
so that they may be as effective as possible.
Let us see how they work.
HOW AND WHERE MONEY is OBTAINED TO LOAN
HERE.
The money loaned in Minnesota comes very
largely from the East. Some people seem to
think it comes here voluntarily. and indeed
ia really thrust upon us by eastern people.
The fact is it is procured only by the most
persistent efforts of the various agencies
If money were being pushed upon us, bor-
rOwers could get it for themselves, and
would not have to pay agents to get it for
them. 1t may be safely Sad that no eastern
man, company or corporation ever asked or
induced people in this state to borrow their
money, hut on the other hand we have con-
tinually begge and besieged them to send
their money here, and have made all sorts or
pledges and promises to furnish them first
class securities and honest borrowers, and
vet it has always been exceedingly difficult to
get them started. Is it to be wondered then,
that every time hostile legislation is threat
ened they at once begin to clamOr for tieir
money, and fOrecOse tleir mortgages II they
can't get it? Suppose all Your properly. be
it little or much was in the shape OF money,
and you had been induced by all sorts of as
surauces to loan it through agents in Idaho,
Nevada or Washington. After a While their
brawliny polite ans begin to denounce these
Minnesota lenders as sharks harpics and
plunderers, and their legislators begin to
seriously talk of cUntisc t ng a part of your
property b. taxation. Now what would you
do? Go on dealing with such people, or
would YOU get that money back ont OF Their
clutches at the very earl st possible moment?
This is our s tuat Oh to-day. Now, II under
these circumstances you would get your
money back as soon as possible, will not
these people do the same thing? And when
they have pulled twenty or thirty millions of
dollars out Of this state, what Will Minnesota
property be worth?
WHEN THE RATE FIXED Is LESS THAN MONEY
WILL. BRING ELSEWHERE.
Now, if the rate of interest fixed by usury
law is less than money will bring in OTHER
places on tie same classes of securities. 1t
will Certainly lie removed to those Other
places as soon as possible, and new money
will not come into the country affected by
such uSury Law so long as it can be loaned
to better advantage elsewhere. There would
be no object for eastern PEG Die TO keep or
send their mOney here, when they could get
better rates sewhere, and every in e.ligent
man knows that they would not and it is
from them we have always got the cheapest
money loaned in the state.
Such law. then, drives out money already
invested here and prevents other money
from coming in. This must. in short time,
make loanable funds very scarce, and the
demand for the none that remains will be
SO great that the price will be forced up IN
spite of all the penalties ard fOrfeiturcs that
can be piled on top of each other Nor is
this the worst of it The pr ce of the dimin-
ished funds will not be enhanced by the
dor md lenders
ttnue in the business will invariably add a
further per centum as an insurance premium
IL r the risk they are ticking. This they must
do, and the borrowers must pay IT, All sorts
of methods wi be resorted to in order to
evadc the usury law, and the greater trouble
and expense of dor business will make
it necessary to ad a still higher per cent
Rcspectable loan agencies will be driven out.
Their eIic ency in procuring outs de money
at low rates w II he utterly DESTROYED, and
their cred with eastern capital stS, which is
worth something to the state IS well as to
themselves, will be ruined.
Can any rational man doubt that these are
some Of the results that must newt" bly, fol-
low the enactment of such laws? Is it even
pOSS he to be otherwise?
But there is another phase of the question
that may be even more etfectual in drlv ny
ava, money than the rate OF interest, aud
that is
UNREASONABLE pm Mites AND FORFEITURES.
Take the proposed usury bills in our legis-
lature to-day They provide that if any more
than certain rate Is taken by any agent the
whole amount of principal and int rest IS
forfeited. 1t makes no difference that the
lender himself knows nothing about the taxi
ing of more than the legal rate-it makes no
difference that he in every way III his power
guards against the taking Of more than the
legal rate nevertheless, if any agent takes
from the borrower commission which, w tn
the interest agreed to be paid, amounts to
more than the prescr bed r ste, the lender,
who has not been in any way to blame, loses
the whole sum loaned, while the borrower.
who must have been know ngIy PARTY to
the wrong doing is rewarded by having his
entire debt cancelled Could an thing be
more unfair and wckcdly unjust?
What eastern man would send his money
out here to be loaned under such law:
Would not any man of common sense rather
lock his money up IN the vaults, where 1t
would ut least he safe. even if it brought him
nothing than to seni it to place where he
might be plundcred in tn manner The
lender. the only honest and innocent person
connected with the trans ictiOn, is the only
person pun shed. The rascaS rewarded, tie
honest, upright man punished!
USURY LAWS ALWAYS MAKE MONEY SCARCE.
Can there be any doubt. then. that the
WhOle tenQcnC' OF uSury laws IS TO make
money scarcer. either by reducing the rate
below what none Will bring in other places
or for chg it out by the hazards and dangers
which such penalties and fOrteitureS impose?
And does any sane man believe thing can
be ma lie cheap b making it scarce! He can
as easily believe II thing may be made white
by making it black. There is only one way on
earth By which anything can be made cheap,
and that Is b. making it plentiful. and on the
other hand, it is just a certa n you will make
it dear when you make it scarce. These are
commercial laws that are just rs fixed, certain
and lmmutabe as the laws of gravitatiOn. 1t
Is just as sure that any commodity viii be-
come ch,u, when it is plentiful, and dear
VIII IN it is scarce as that an unsupported
body will fail TO the earth. These are natural
laws, that cannot be changed by legislatures.
An act of the legislature. st ting that hence
forth all rivers should flow back from tine
seas to the mountains. won be no moro
sensniess and ineffective than an act decree
ing tn t hereafter any article that is scarce
shall he. cheap, and an thing that is p!entitu l
shaI be dear. 1t cannot be done. Natural
laws will hold the right of way against stat
ute laws always and if collision occurs, t is
the latter only that will furn sh the debris.
LOWEST RATES ALWAYS ON SECURITIES NOT
AFFECTED BY USURY LAWS.