Year: 1875

Cheap Money in England.


The despatch from London printed yester-


day challenges the thoughtful consideration
of Messrs. Pendleton, Kelley and Butler and
their infationist allies and disciples. That
despatch repeats what we knew before, that
money was drug in the London market
and the rate of discount merely nominal.
The instructive part of the despatch, which
purports to be the substance of an article in
the London Times is its description of the
consequences of cheap money as felt by the
weaker portion of the trading community
Instead of operating for their advantage and
relief it prevents them from getting loans at
all and renders failures inevitable Such
result is in accordance with general expert
ence. When the rates paid for the use of
money are very low its owners are not anxious
to lend, and demand the most perfect secu-
rity, whereas high rate of interest tempts
banks and capitalists to incur considerable
risks. We have constantly Witnessed
the operation of this principle under
our usury laws. The law of the State
of New York which forfeited the
principal when more than the legal rate of
interest was taken has never prevented loans
at higher rate than seven per cent ten or
twelve per cent always tempting lenders to
risk the total loss of their money, principal
and interest alike. Now, the class of people
to whom the demagogic clamor for ''more
money" and "cheap money is addressed are
debtors of doubtful credit, or would-be bor-
rowers who cannot furnish good security,
and who fancy they could easily procure
loans if the currency were more abundant
and the rate of interest very low. The pres
ent state of things in London should teach
these deluded people little sense. There
is great amount of currency lying idle in
our banks. Nobody has any difficulty in
procuring the loan of as much money as he
needs if he offers siceh security as the banks
think it safe to accept When the rate of
interest is high lenders are willing to take
some risk and are not so particular as to Sc
curity. But when, as happens in London at
present, the rate of interest is exceedingly
low, there is no temptation to run any risk
and it is impossible for persons of doubtful
credit to procure loans at ALL The instruc-
tive London despatch which is the occasion
of these remarks deserves to be pondered
by the American advocates of cheap money.


Cheap money in London is instructive in
another and more important point Of view.
1t proves incontestably that low rates of dis
count have no necessary connection with the
amount of paper money in circulation.
There has been no increase in the paper cir
culation of England since the passage of the
Bank act in 1914, more than thirty years ago.
The business transactions of England have
quadrupled within that period, but the same
amount of currency Is not only found to be
adequate, but money is sometimes such
drug that it can be borrowed at two per cent. I.
Let our crazy inflationists attempt to digest
this tough fact. Let them tell u.s. if they
can, why the laws Of trade should not operate
in the same manner in Great Britain as in
the United States. In great truth they are as
invariable as the physical laws of nature and
it would be as absurd to expect water to run
down hill in one country and up hill in
another as to fancy that the principles Of cur
rency and trade operate differently in differ
ent countries. The large part played by
bank checks in modern payments and the
settlement of bank balances by clearing
houses dispense with great amount of cur
rency. They enable England to transact her
enormously increased business with the same
amount of paper money which she possessed
thirty years ago. And yet she has abundant
money and cheap money beyond any other
nation in the world.