Usury; Or, Interest, Premium and Discount

by S. H. Crittenden

2d. If C sells goods to D and within a certain limited time, usually among the jobbing trade of our city 30 days after purchase, D pays for them in cash, usage again allows him a deduction from the face of the invoice of say 5 per cent. This is also called Discount, but it is not properly such. For it is only a deduction of such a proportion or per centage of the bill, on fulfillment of certain conditions; while Discount is reckoned with reference to time to run, as well as rate per cent.; in fine, Discount is simple Interest paid beforehand.

3d. The term Discount is also applied to that sum which is advanced beyond or deducted from the amount of a debt, in remitting money from one country to another.

Thus, if I wish to remit a sum of money to any foreign country, it is needful for me to ascertain what is the difference of valuation at the present time between money of the denominations used and ordinarily obtainable here, and those in the country to which the remittance is to be made. This valuation I suppose you all understand is a merely arbitrary one, fixed at the will of the supreme power in any State, and varying according to circumstances and the ideas of the law makers. If, for instance, owing to the different amounts of alloy used in coining pieces of corresponding value in different countries, there is say 5 per cent. more precious metal in the coin of that country to which I wish to remit than in that of our own country, I must necessarily pay this difference in addition to the original sum, in order to render the account of my correspondent good according to the valuation in his country. If on the other hand the intrinsic value of our coin is 5 per cent. the greater, then one hundred dollars of our coin will pay one hundred and five dollars of the other.

The proper term for this is Exchange, and if this name were universally adopted, there would be far less of confusion in the ideas associated with such transactions, in the minds of most persons.

We will now turn to a consideration of the peculiar nature of Interest, or more properly Usury, and the reasons assigned for a limitation of its rate by law. Formerly, the amount received in payment for the loan of capital, was denominated Usury; that is to say, rent for its use and enjoyment.

This is the correct term, for Interest is only the rent, or price paid for the enjoyment of an object of value.

But this word has acquired an odious meaning, and is now understood to express an illegal and oppressive rate of interest only, the milder but less expressive term being substituted by common usage.

In earlier times, before the advantage and utility of a reserve capital was known and appreciated, the demand of a rent for its use by lenders, was looked upon as an abuse of power, and an oppression towards the needy. And, more still, it seems from the accounts handed down to us by the writers of those days, that even that frugality, without which capital cannot be amassed, was looked upon as parsimony, and deemed a public injury, by the populace, who looked upon all sums not spent by the great proprietors, as lost to themselves. They could not comprehend that money laid by, as a capital for some profitable employment, was to all intents equally spent; and that to in a way far more beneficial to the poor. For a laboring man is never sure of earning a subsistence save where there is a capital in reserve for him to work upon. This inability to understand its use gave rise to strong prejudice against rich individuals, who do not spend their whole income as it comes in; such a feeling still exists to a great extent: formerly it was universal. Lenders themselves were infected by it, and were so much ashamed of the part they were acting as to employ the most disreputable agents in the collection of profits perfectly just, and highly useful to society.

There have been from time to time various species and modifications of statutes, and enactments for the promotion of public liberty, and the advancement of happiness, both private and public.

Yet, though these ordinances have been provided in all good faith, by the legislators, it is evident to every person who observes closely, and compares causes and effects, that oftentimes their operation is inefficient for the end aimed at; and often directly the reverse in effect from the original intention of their makers. Especially, it seems to me, is this the case in the matter of those laws relating to Usury.