Year: 1879

.:H-.& Cheap Money. >. ...'


. Never before in the history of our
Government was money SO cheap !;
that is to say, was interest SO low new
er. There is plenty of money, and We
could borrow all we wished had we the
collaterals.-Bo6. l,sgersoN. Ill.


We have repeatedly, shown that the
current low rate Of interest is result
of the scarcity of money, but since the
old lie that there is plenty of money
has not remained buried, we will bury
it again. There is now about $780,
100000 Of money in the United
States, exclusive of what is in the
United States treasury. Now suppose
laws were enacted that would reduce
the amount Of money to half that sum
in two years. It is evident that mon-
ey would become huch scarcer. Now
if you had SIC, 900 IN cash., which,
would you rather do, loan it out at
three per cent interest, or invest it in
a Touring mill, if there was to be as
great reduction in the volume of the
currency of the country as stated
above. If you invested in a mill, at
the end of the two years you would
find that money had become SO scarce
that wages had fallen, and the prices
Of all the machinery, lumber and ma
terial used in the construction of the
mill had fallen 50 that $1,000 would
build just as good a mill as yours.
Consequently you lose $4,000. But
suppose you loaned your money at
three per cent per annum. At the
end of the two years your $4,000
would have increased to $4,000, and
its value would have increased SO that
it would buy as much of any commod~
ity or pay for as much labor as $780,
600 would at the time the money was
loaned. 1t is plain that the very fact
that money is becoming scarcer, makes
it better policy to loan money at a ve~
ry low rate Of interest, or lock it up in
a safe at no interest at all, than it
would be to invest it in property.
The increase in the value and purchase
ing power of the money, even while it
is locked up, is. in reality, an enormous
rate Of interest. On the other hand,
if the volume of currency was steadily
increasing, and money was constantly
becoming more plenty, the current rate
of interest would be high. The prices
OF all kinds Of property would increase,
and every man who had money locked
up would take it out and invest it in
property, or if he loaned it he would
require high rate of interest,". Eve>
ry person who is acquainted with the
conditions of trade and business in this
country during the past twenty years
ought to know that we are right.
First there was an imitation of money,
caused by the war. Prices ran up,
and interest on loans was high. Then
VIC had contraction Of the currency.
Ths vast system Of credit that had be-
come prevalent as result of Initiation,
served to maintain prices and delay
the effects Of contraction for some
time; but the crash finally came.
The crash destroyed credit, and the
results were the same as would have
been caused by still further actual
contraction. For credit fills the place
Of currency, and when there is no cred>
it the currency itself has to be used,
instead Of its place being filled by a
substitute. And after actual contrac>
tion and loss of credit had, in effect,
made money very scarce, it is well
known that interest fell. Ingersoll
says that low ratio of interest indi>
Gates plenty Of money. Now when
money is becoming scarcer, interest
falls; when money is becoming more
abundant, interest rises but when the
currency is stationary in its relation
to the wants and needs of the country,
there is no effect whatever upon inter-
est. A man Of 1ngersoll's reputation
ought to know this. If you borrow
one hundred bushels Of wheat, at ten
per cent interest, principal and interest
payable in wheat, it makes no differ
ence to you whether wheat is worth
fifty cents or five dollars a bushel, if
the price remains stationary until the
debt is paid. In either case you have
to pay as interest one>tenth of what
you borrowed and no more. It is the
same with money. IF you borrow a





sum Of money, it makes no difference
whether money is so scarce that TWEEN,
ty>fye cents will pay for a days labor,
or so plenty that labor is worth FIVE
dollars day., if the value Of money
remains stationary until the debt is
paid. If the rate Of interest is ten
per cent, you have to pay the price of
one days labor for having the use of
the value Of ten days. labor a year in
either case. The price Of wheat may
vary from fifty cents to i've dollars, but
the rolo finn ~ a .h,,cbo1& ~ sx.l..A ~.